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> The magnitude of the crisis is up for debate. Treasury Secretary Janet Yellen said last week that losses in commercial real estate are a worry, but that the s

by xyst 3y ago

> The magnitude of the crisis is up for debate. Treasury Secretary Janet Yellen said last week that losses in commercial real estate are a worry, but that the situation is “manageable,” a similar sentiment expressed by Fed Chair Jerome Powell in a 60 Minutes interview on Feb. 4. Others have more dire outlooks, with real estate investor Barry Sternlicht predicting $1 trillion in office losses. Fuck man. Another ‘08 situation is building up.

wizerdrobe 3y ago
Unto itself, would losses in commercial real estate cross over into residential or would it require a broader market slump a la ‘08?
- notaustinpowers 3y ago
  It's convoluted, but yes, it can cross over into the residential market in a few different ways (not as similar as '08 since '08 was largely due to poor lending actions (IMHO). - As the commercial market is a large investment arm for financial institutions, a collapse in the commercial market can cause a credit crunch (banks don't have enough money to provide loans like they used to). Making it more difficult for people to get mortgages or loans for residential property. - As the commercial market falls, investors and developers will begin looking toward the residential market for their investments. This could lead to an increase in residential housing availability. However, I believe this would exacerbate the trend of "build-to-rent" communities as it would provide the developer/investors with consistent, predictable, monthly income. Ultimately, a "collapse" of the commercial real estate market would severely negatively impact the residential housing market due to consolidation. If renting out office towers is no longer profitable, why not rent out entire housing communities? And since banks are crunched and may have to further restrict their mortgage and lending practices, low and middle-class people could be further locked out of homeownership.
infecto 3y ago
Hard to trust a talking head investor who is just advancing his position/holdings.
- rchaud 3y ago
  Precisely. Reminds me of the well-to-do investors going on Twitter in March '23 screaming for the Fed to exempt them from the $250k FDIC limits when Silicon Valley Bank failed.
- IncreasePosts 3y ago
  Sure, but at least remember that the position came after his beliefs on the market. He wasn't assigned a random position and then needs to sell it - this is what he believes, and he put his money where his mouth is.
  - infecto 3y ago
    I don't need to remember anything, he of course made those investments, if they exist at all. Everyone has an opinion, even for the individuals who have historically made lots of money, but they are often wrong. Lets not forget that.
    - IncreasePosts 3y ago
      Of course they could be wrong - my point is that he isn't just trying to sell you something that he's been burdened with. No one said you need to believe him - I was merely pointing out that him having a position and talking about his belief in the position is quite different from a talking head.
      - infecto 3y ago
        He is trying to sell you something though. That is my point. Maybe he is wanting to buy CRE at an ultra discount, maybe he is holding an inverse position. The only reason to be so public about bets is because you have some sort of angle not that you have conviction in your public statements/comments.
dboreham 3y ago
> Another ‘08 situation is building up. Have they been selling synthetic REIT stock?
AnimalMuppet 3y ago
How big were the losses in '08? And, it's not just the total magnitude of the losses. Who takes them and how they take them makes a big difference. Hopefully there's nothing pseudo-bank-like waiting in the weeds (like the repo market or reverse repo or whatever it was) that can make this blow up into a bank-panic-like situation...
le-mark 3y ago
There was a mania around residential real estate, adjustable rate mortgages, swaps, cdos and synthetic cdos, that all hinged on adjustable rates resetting up starting in 2007 that drove the 2008 crises. The movie “The Big Short” does a good job explaining it for us laymen imo.
mannyv 3y ago
Realistically speaking, the authorities are trying to contain a panic. From what I understand banks are loaning money to commercial real estate firms and those firms are using those loans to make payments, just so they don't default - because a default would mean that banks would have to recognize those losses. I'm not directly plugged in anymore, so obviously take that with a huge pitcher of salt.
tmaly 3y ago
It seems like the 08 situation was not really solved. The bank loses were put on the taxpayer for the most part.

by xyst 3y ago

wizerdrobe 3y ago

Unto itself, would losses in commercial real estate cross over into residential or would it require a broader market slump a la ‘08?

notaustinpowers 3y ago
It's convoluted, but yes, it can cross over into the residential market in a few different ways (not as similar as '08 since '08 was largely due to poor lending actions (IMHO). - As the commercial market is a large investment arm for financial institutions, a collapse in the commercial market can cause a credit crunch (banks don't have enough money to provide loans like they used to). Making it more difficult for people to get mortgages or loans for residential property. - As the commercial market falls, investors and developers will begin looking toward the residential market for their investments. This could lead to an increase in residential housing availability. However, I believe this would exacerbate the trend of "build-to-rent" communities as it would provide the developer/investors with consistent, predictable, monthly income. Ultimately, a "collapse" of the commercial real estate market would severely negatively impact the residential housing market due to consolidation. If renting out office towers is no longer profitable, why not rent out entire housing communities? And since banks are crunched and may have to further restrict their mortgage and lending practices, low and middle-class people could be further locked out of homeownership.

infecto 3y ago

Hard to trust a talking head investor who is just advancing his position/holdings.

rchaud 3y ago
Precisely. Reminds me of the well-to-do investors going on Twitter in March '23 screaming for the Fed to exempt them from the $250k FDIC limits when Silicon Valley Bank failed.
IncreasePosts 3y ago
Sure, but at least remember that the position came after his beliefs on the market. He wasn't assigned a random position and then needs to sell it - this is what he believes, and he put his money where his mouth is.
- infecto 3y ago
  I don't need to remember anything, he of course made those investments, if they exist at all. Everyone has an opinion, even for the individuals who have historically made lots of money, but they are often wrong. Lets not forget that.
  - IncreasePosts 3y ago
    Of course they could be wrong - my point is that he isn't just trying to sell you something that he's been burdened with. No one said you need to believe him - I was merely pointing out that him having a position and talking about his belief in the position is quite different from a talking head.
    - infecto 3y ago
      He is trying to sell you something though. That is my point. Maybe he is wanting to buy CRE at an ultra discount, maybe he is holding an inverse position. The only reason to be so public about bets is because you have some sort of angle not that you have conviction in your public statements/comments.

dboreham 3y ago

> Another ‘08 situation is building up. Have they been selling synthetic REIT stock?

AnimalMuppet 3y ago

How big were the losses in '08? And, it's not just the total magnitude of the losses. Who takes them and how they take them makes a big difference. Hopefully there's nothing pseudo-bank-like waiting in the weeds (like the repo market or reverse repo or whatever it was) that can make this blow up into a bank-panic-like situation...

le-mark 3y ago

There was a mania around residential real estate, adjustable rate mortgages, swaps, cdos and synthetic cdos, that all hinged on adjustable rates resetting up starting in 2007 that drove the 2008 crises. The movie “The Big Short” does a good job explaining it for us laymen imo.

mannyv 3y ago

Realistically speaking, the authorities are trying to contain a panic. From what I understand banks are loaning money to commercial real estate firms and those firms are using those loans to make payments, just so they don't default - because a default would mean that banks would have to recognize those losses. I'm not directly plugged in anymore, so obviously take that with a huge pitcher of salt.

tmaly 3y ago

It seems like the 08 situation was not really solved. The bank loses were put on the taxpayer for the most part.