Commercial Real Estate Values- “Watch Out Below”
While the US housing crash is certainly not breaking news, the likely crash in commercial real estate values may be.
Now bankrupt, Lehman Brothers, attempted to dump their commercial portfolio’s, without success. Insurer AIG, who will face insolvency in the absence of a bailout, also has a huge portfolio of commercial property that they will be forced to liquidate. Bank of America, Wachovia, Citibank, Merrill Lynch and other financial behemoth’s are also likely to dump billions of dollars of commercial real estate on the market, as they race to head off bankruptcy.
This progression in the collapse our financial systems spells much more misery for the US home owner. The human casualties will continue to rise, as thousands of “potential” home buyer’s will be eliminated from the housing market due to job loss. In addition, we are likely to see an increase in housing inventory, as displaced workers can no longer afford the payments on their over priced homes.
It seems the real beneficiaries of the tax payer bailouts, which doubled the US national debt, are the banks of China and Japan who hold billions of dollars in US government sponsored enterprise (GSE) debt.
So, what does this mean for you and me? In a nut shell, falling real estate values, more unemployment, more homelessness and more suffering.
Why is it happening? The policies of the Bush administration, who found it unnecessary to regulated or supervise the greedy bankers, most of whom are its friends and contributors.
Is there an upside for residential homeowners? The short upside is that the Fed will likely be forced to lower interest rates this week, which will help those who need to refinance or those who trying to qualify for a loan.
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Tags: aig, bank failure, bush administration, commercia property, commercial real estate, commerical crash, commerical property values, falling, government bailout, gse, lehman, reit
September 16th, 2008 at 4:24 pm
You are right, there will be lower interest rates, but it definitely does not outweigh the negatives. Hopefully some kind of solution can be reached before the situation escalates into a much worse disaster.
September 23rd, 2008 at 6:41 pm
Wrong…the cause of this was the democrats loosening up the requirements to get a loan…so anybody and everybody would be eligible to get a loan to become a homeowner…regardless of credit worthiness…started in the Clinton admin…main proponents were domocrats…get your facts right
September 24th, 2008 at 1:14 pm
I could care less about politics, but how could any taxpayer blame our present situation/crisis on an administration that hasn’t existed for nearly 8 years? The present failure of our financial system is not a result of loan defaults from 8+ year old mortgages. The problems began with loans originated primarily between 2004-2006, as Bush pushed homeownership policies (ie: lack lending requirements) as a part of his 2004 reelection bid.
While no one can make an individual take on debt that they can not afford, the Bush administration is solely responsible for its policies, its failure to oversee, its failure to govern and it miserable failure to protect innocent taxpayers.
If you are interested in Bush and his push for homeownership at any cost, just google “Bush homeownership”. Here are a couple of interesting links, to get you started:
http://openthread.dailykos.com/storyonly/2008/9/23/102817/214/793/607383
http://www.whitehouse.gov/news/releases/2002/06/20020618-1.html
http://www.policyalmanac.org/social_welfare/archive/wh_minority_housing.shtml
http://online.wsj.com/article/SB122118681151726565.html?mod=googlenews_wsj
September 24th, 2008 at 1:19 pm
This is an interesting article about this subject from 2004 that was found on MSNBC and distributed throughout the AP.
Bush ties tax relief, home ownership
President wants to add new minority home owners
The Associated Press
updated 11:07 a.m. ET, Sat., March. 27, 2004
CRAWFORD, Texas - Focusing on the dream of home ownership for the nation’s minorities, President Bush on Saturday credited his tax relief program for being a key to driving the housing market to record levels.
“Because of tax relief, Americans have more to save, spend and invest — and that means millions of American families have moved into their first homes,” Bush said in his weekly radio address as he spent the weekend at his ranch.
In a swing through the Southwest on Friday, the president highlighted three of his economic policies he said can help nearly 400,000 low- or moderate-income families become home buyers.
One of the approaches, the American Dream Down Payment Act, will help low-income Americans afford the down payment and closing costs on their first home. Bush is asking Congress to provide $200 million a year for the program. He also proposes to make zero down-payment loans available to first-time buyers whose mortgages are guaranteed by the Federal Housing Administration.
In addition, Bush is proposing a tax credit to encourage builders to provide 200,000 affordable homes over five years for low-income families.
These and other steps, he said, will push the nation toward his goal of adding 5.5 million new minority home owners by the end of the decade.
But housing advocates say assistance for renters is just as critical a component to addressing the housing needs of families with limited financial resources.
As Bush visited his state Friday, Democratic Sen. Jeff Bingaman of New Mexico said the administration is proposing cuts to key housing programs such as the Section 8 voucher program that helps low-income people defray rental costs, “the first rung on the ladder” to home ownership.
Bush eyes private sector solutions
Bush, in contrast, sees private sector solutions, saying he has encouraged the real estate and mortgage finance industry to “join our efforts in closing the home ownership gap.”
With a big boost from low interest rates, the nation’s 68 percent home ownership rate is the highest ever, while minority home ownership is just over 50 percent.
In his trip through the Sun Belt states Friday, the president met with Lori Benavidez of Albuquerque, N.M., a single mother who told the president: “I never thought the day would happen when my girls and I would be sitting in our own home. It is a miracle.”
Every time a family moves into a home of their own, “it fulfills a dream and it shows faith in the future,” Bush said in his radio address.
Bingaman says the administration’s proposed budget zeros out the Hope VI program, aimed at revitalizing distressed public housing. He said the program got $574 million in fiscal 2003 and $150 million in fiscal 2004.
The Rural Housing program which encourages ways to serve the housing needs of rural communities also would get a $24.8 million cut by the administration, Bingaman said, along with $10 million from the Native American Block Grant Program. It provides general housing assistance and encourages private lenders to provide home financing in Indian country.