The commercial real estate disaster is sinking banks on a weekly basis. Talk of a V-shape recovery is now largely a moot point since we are past the point of a quick and strong recovery. The question now revolves around what we are going to face for the next few years. Commercial real estate really is a harbinger of what went wrong in the last decade. Banks and builders hungry for massive profits overestimated the demand for Starbucks and Macys locations around the country. After all, you actually need money to spend and many average Americans are struggling just to pay their monthly bills. The only way commercial real estate (CRE) was going to do well is if we had a booming population of young and wealthier professionals with more disposable income. Yet that did not happen.
Even though the claim of building and bottom talk is now out there in the open, banks that actually lend the money for these projects have different ideas:
Lending for commercial loans has collapsed. Even though banks would like you to believe that all is healthy and strong they have a front row seat to the carnage in the CRE market. And with CRE locations you get an actual real feel of the economic problems we are facing. Many Americans have pulled back on their spending and without spending many places simply cannot move forward. Banks are also taking scissors to American credit cards and access to other people’s money is slowly going away. The CRE market at one point was valued at $6.5 trillion. Today it is closer to $3 to $3.5 trillion. The loan amount at the peak was roughly $3.5 trillion so you had a nice equity cushion. Today, the balance is nearly the same but the value of the collateral has collapsed:
Bad link EA?
ReplyDeletePre -crisis the US economy was running on credit. Trillions in dud bonds were exported to the rest of the world and when these bonds went bad, as Americans could not pay their debts, the economic crises became a worldwide thing. European banks were technicaly bankrupted too. Balance of trade figures show that the total after tax profit /dividends paid out by all American corporations were less than the inflow of new capital loaned to America
ReplyDeleteTheir were no real profits being created in America apart from the financial scams in the finance sector that counted for about 40% of all profits and about 40 % of stock exchange value. This means that with no profits, on the whole ,no American workers contributed or were exploited for profits ,sufficient to pay for American consumption of value from the rest of the world.
The dud bond business and bank profits and business loan transaction fees died in the ass,as the foreign capitalist credit supply no longer trusted US AAA bonds.
So, the US economy is now running on an empty tank and printed fake profits.
Recovery of that great ponzi economy is impossible since the credit supply already died in 2008 ,when sub –prime and Fannie and Freddie housing mortgage bond markets collapsed.
The US was exposed and seen to be a giant ponzi and that the dollar hegemony itself would likely disappear in a frenzy of money printing or in a US default on its debts. The US Choose money printing.
After the bailout coup the banks had their losses socialized and their capital refunded by the government. A lot of their old bad loans and dud sub-prime and ARM housing mortgages and property bonds have been transferred over to the Fed for the taxpayer to pay off for them.
The free, refunded bailout capital, is used as bank reserves re-capitalizing the banks, is parked back at the Fed so the government can give them an 1% interest income on the money they gave them themselves. Free money and free ‘no risk’ incomes on the gifts!
Some of the free bailout money is even invested in treasury bonds at an even higher rate of government interest, so the government is not seen as openly buying its own treasury bonds directly.
The graph above shows the banksters are not silly.
They are not going to loan this free "hard earned” bailout capital as investments in a dud economy as investment loans for commercial buildings and the like, when they know there are no real profits to be got in America.
As even foreign vendor finance from China and other countries to finance America commodity imports is cut back , many retail shops close down unable to sell their goods on credit, or on credit cards.
So,as the shopping mall Ponzi is over , why would even American banks want to invest in shopping malls or other commercial property as property values and rents fall.
Even small bank branches are disappearing ,as they have no real business to do they just wait their turn to be seized by the government and have their depositor business handed over to the TBTF chosen few big bank monopolies.
The only big source of profit left in America now is looting and foreclosing on the assets of the middle class housing and even that’s not so hot, as the property assets continue to fall in value .
The CRE crash is a Republican failure. When have you ever heard of ACORN placing anyone into a shopping mall or office building?
ReplyDelete3:58...Grow-up!!!
ReplyDeleteThe whole crash is a Republican failure.
ReplyDeleteThey sold the loans to people who could not afford them. Bushie's everybody should own a home program even if they can't make a down payment.
Their foriegn policy blunders with wars. That cost a million people their lives and our economy $$$$$TRILLIONS
Their selling our job's and industry to China for short term gains.
Their tax cuts for the rich.
Their greed for oil at the expense of the entire Gulf of Mexico.
Repulicans are the root cause of all failure.
They were in charge for 10 years and did nothing but rack up debt and now they hate what they created.
6:11
ReplyDeleteBush's goal was to have everyone owns a home. That way the government can collect property tax. But it did not turn out as planned.
6:11
ReplyDeleteReading your comment just made my brain deflate like a whoopie cushion.
I would like to say...
Actually I can't think after reading 6:11's post. I've become infected with his stupidity. I think I'll go watch the View later and get informed on important issues. I'll sit with my hands in my lap and my right leg crossing over my left one like a typicaly male liberal.
Anyways now to focus on serious things. I'm thinking about taking notes on all of these things I'm able to witness happening at this time. I will recall the histories leading up to this apex and all the behaviors that spurred it on. The New Civilization shall be built with the best possible foundation; it will need to know what to avoid and what to bypass.
bypass all insane repubicants, will be the first step in building a new foundation. They are the ruination of this country.
ReplyDeleteHere is a great exaple of a CRE-Fail...
ReplyDeleteMoffett Towers I
Moffett Towers II
Completed about 2 years, they are completely empty with the exception of Rambus as one tenant, although I see very few cars parked at/near their location. And on my short drive into work, I see 50% of the CRE vacant and For Lease.
Rest assured. In 10+ years when/if things turn around, the Moffett Towers will be ready and waiting!
There are no young wealthy professionals because A) Nobody hires them, B) If somebody does, it's for a crappy wage, and finally the kicker, C) They are drowning in student debt and can't afford to do much besides pay off their student loans and room with 7 people in an apartment.
ReplyDeleteI don't know which genius thought that putting an entire generation of youth in 6 figure debt was a GOOD thing, but I'm sure the media will choose to either ignore it or blame the youth as "lazy" people that "don't want to work" like they do for the unemployed and others that got fucked over by this shitty corrupt system.
There is no such thing as a wealthy young professional these days. Either you were born wealthy now, or you will be a wage slave your entire life.
Hard to believe that people are still into the Republican versus Democrat BLAME GAME.
ReplyDeleteWhen BOTH the Republicans and Democrats have allowed the Federal Reserve and Banksters to print money and get us all into DEBT.
It is ALL ONE BIG DEBT PONZI SCHEME
and all Congress is responsible as
they allowed the Federal Reserve get
power and then have failed to take it away.
Get rid of the privately owned Federal Reserve Banking System!! We all would be better off, especially the middle class.
ReplyDeleteThis is the beginning of the end. There will be an absolute glut of properties as the last white collar jobs will go to India and the blue collar jobs will go to China.
ReplyDeleteTime is running out.
Friends, Romans, Countrymen, lend me your ears:
ReplyDeleteIt's over, just waiting for the financial crash that will happen in domino fashion...Picking up speed quicker and quicker as more things cause other things to give out.
The question has never been how/why? The question is WHEN?
Both parties caused it some more than others but in the end they worked together to ruin the nation...Some spent it on wars and weapons "Protecting America from invisible evil men who hate us for our freedom"...Some spent it on social programs with few limitations and heavy on the "Victim Plea."
As I've said a few times, I was in Mexico when the peso collapsed...We survived because we adjusted and actually have no problem hustling to make money...Teachers drove taxis, Professionals sold shoes, office supplies, make up from their homes, my cousins went out at 5 in the morn to sell breakfast food to the travelers getting on buses and trains.
As for the Real American?...You guys have almost been bred out...All I see is men/women with no skills and no spirit to go just work at anything in order to feed yourself and your kids.
Not all obviously because this site does have some stand up people but honestly if you're a sheep or an idiot, odds are you won't be reading sites like this one.
If SHTF today and the stores were looted, unless there's martial law everything will come to a grind and start deteriorating within a week...Why?
Because that's the average the regular American keeps handy for emergencies in their pantry.
I live ON TOP of the San Andrea's Fault yet my neighbors and friends usually have no extra water, ammo, TP, food or even a 1st aid kit...Hell Costco sells an Emergency Bucket and they won't even get that...Sometimes things have to get realllllly bad in order to reset people's way of thinking.
Trust me go a few days without food, gas or electricity and people will learn to prep for an emergency...But by then how much looting, raping and pillaging will have happened in parts of the country?
A Ponzi scheme within a Ponzi scheme within a Ponzi scheme.
ReplyDeleteThe house of cards is crumbling and they keep trying to patch and prop to keep it standing. The problem is with the foundation and structural supports. They have some serious rot that has corrupted them.
12:55 you nailed it!
The Republicans deserve a lot of the blame, but the Democrats are helping. Most of Congress is not willing to do what is necessary to help the middle class.
ReplyDeleteYes, there are ways to scrape by, but things are getting worse. The states are going broke too, so they are raising taxes (even in areas where the real estate bubble burst) and adding all sorts of fees. Coming up with the necessary money is getting harder, so people are cutting back in areas where they have some control: clothing, food, and spending money on other things.
We are in for a long, hard, bumpy ride.
How can a damn democrat who loves spending someelse money blame republicans. I laugh everytime I hear someone say the gov. pays for this or the gov. provides for that. It's our money you idiots. Obama has spent more money in 18 months than both bushes and a clinton. I work in the home health industry, when I go to some homes where couples live paid for by tax dollars, have 4 or 5 children, neither mom or pop works by the way, light bill paid for, yard cut by tax dollars, grandma sitting in a recliner unable to walk, but kept at home to keep the check coming in, and the sorry ass dad watching a 52 inch plasma screen tv drinking beer, which was probably paid for by selling food stamps. The lazy ass americans, and overboard entitlements are gonna sink this country, and both dem/repub right along with it.
ReplyDeleteThose republicans are at it again! They are calling my house every twenty minutes asking me if I will give them poozie. What is poozie? After the last call I went to the bathroom and the toilet seat was so hot because of that Republican global warming I got all upset with myself and almost went flabety on my daddles. It took me nearly the rest of Oprah to get rid of my fluster when I felt like I was being oppressed by the Republican platform and I wanted to get out and go to Wal-Mart but George Bush was cutting taxes for eight years and the Republican war was making me flustered again so I just had a slash of Jack Black and watched Joy Behar crossing and uncrossing her legs while President Obama was so funny I passed out but the phone rang and that Republican was calling again. How will we ever get out of this Republican depression with the Republicans calling everyone for poozy when there isn't enough immigration to mow my lawn?
ReplyDelete