A lot of our readers are either owners of, investors in, or curious about Residential Real Estate. We are all too familiar with the Housing Bubble, so we don't need to rehash it, but did you know that following fact; "Troubled commercial real-estate loans accounted for more than 65% of problem loans among the 11 banks that failed in October" (Data from Trepp LLC)?
"Construction loans turned into a particular albatross, and even the commercial mortgages have turned into a problem area for a lot of banks", says Matthew Anderson, Trepp's managing director, in a recent WSJ article titled "Commercial Real Estate Continues to Weigh on Banks", written by Jacqueline Palank. Further, Palank writes that Commercial real-estate distress "shows few signs of abating and continues to push U.S. banks to—or past—the brink of collapse".
The data from Trepp shows the bank failures due to Commercial Real Estate loans are trending towards the smaller banks, and have a "regional tinge". Anderson stated that in the Midwest and the Southeast, "there are still a lot of smaller banks that have high exposure to commercial real estate, including construction and land loans". He also adds that "It's generally been smaller banks that have been failing," since "For a large number, the exposure to commercial real estate still is very substantial."
The interesting thing here is that there had been a growing fear in the background among those familiar with the industry, which was a "waiting for the other shoe to drop" type of fear. What I mean is that when the Residential market tanked, many experts were watching and waiting for the Commercial Real Estate Market to follow.
Have we moved beyond the worst of it? What are your thoughts?
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TAGS: #CommercialRealEstateLoan #Constructionloan #commercialmortgage #bankfailure #ResidentialRealEstate #Midwest #Southeast