Posted on 04/04/2023 9:51:46 AM PDT by Kaiser8408a
US Treasury Secretary is the God of Hellfire!
Thanks to Yellen’s catestrophic Too-Low-For-Too-Long (TLFTL) and insane Federal spending, we are seeing the aftermath of The Fed trying to fight inflation. A fire sale of failed bank assets!!
With interest rates still rising, prices retreating and credit evaporating—and a stressed-out banking system moving to shore up balance sheets—expect more fire sales of older CMBS loans and an acceleration of plunging CRE values in markets across the US.
Last month, a fire sale of CMBS loans was lit as $72B in assets from the failed Silicon Valley Bank (SVB) were sold. The SVB assets—including about $13B in real estate exposure and at least $2.6B worth of CRE loans—were sold at a discount of $16.5B, which translates into about 77 cents on the dollar, according to a report in MarketWatch
The rising cost of debt was cutting into the value of older, low-coupon loans before SVB and Signature were shut down. Now, everyone is guessing how low will prices go on CMBS loans in the wake of the fire sales of the fallen lenders’ portfolios.
A recent advisory from Cohen & Steers estimates the decline in values will likely be at least 25%. Loans associated with multifamily properties won’t be immune from the valuation hit; apartment rents declined for the fifth time in six months from January to February.
For office properties, especially in Manhattan, the decline in value will be much steeper. Older NYC office properties are facing a cliff-diving plunge of up to 70%.
CMBX S15 is plummeting like a paralyzed falcon after The Fed started raising rates.
So instead of The Boston Strangler, we have the DC Strangler.
(Excerpt) Read more at confoundedinterest.net ...
Should the Fed Funds rate always be at 0% - kind of like Japan, who has been in a monetary recession since December of 1989?
Here's the actual story.
Lot's of people and companies got burned because they believed "free money" was here to stay.
Interest rates are still very low historically.
cmbs
commercial mortgage backed security
i had to look it up
i hate that
Work-from-home is dampening, if not largely killing, commercial real estate everywhere.
As a commercial RE investor, no ... you never underwrite without believing there will be some form of rate increase. However, the velocity of rate increases is playing hell with CRE, because most CRE is purchased with variable-rate loans, so returns have been pretty much non-existant this last year so that asset managers can have a warchest to ensure they can make the mortgage payments. On top of that, CRE usually buy rate caps, and these cost several hundred thousand per year. Now, since returns have already been evaporated by the rate hikes, if rents start to drop significantly, or rates continue to go up, then you will have a wave of foreclosures which will put several more banks out of business. The ONLY way out is to lower interest rates ... even by a point ... to allow the markets to reset (for at least a year) before the Fed does any more stupid shit.
“Work-from-home”
If you can do your job from home your job can be done in India.
The ONLY way out is to lower interest rates ... even by a point ... to allow the markets to reset (for at least a year) before the Fed does any more stupid shit.
I had to look up several acronyms. I hate it, too.
Banks should match loan maturities with deposit maturities.
Also, any person or entity that bought mortgages under 3% was stupid.
“cmbs
commercial mortgage backed security
i had to look it up
i hate that”
Me too. The sign of poor writing . Acronyms should be spelled out before using them.
Did you find out what S15 stands for?
I want to clarify your statement...
UBS bought all the remaining deposits and loans in the SVB portfolio for $72 billion.
No one knows what deposits or what loans UBS bought.
And, we still have no public information about any problems with the SVB loan portfolio.
In fact, just a couple weeks before SVB collapsed, the holding company that owns SVB reported a $1.5 billion profit for 2022.
Almost one month after the SVB crash began, I still to come to the same conclusion...
SVB was the victim of an old fashioned bank panic.
When huge numbers of depositors start withdrawing their money on the same day, every bank in the world is in danger.
You are correct but will it be done right and with great customer service?
The banks under Obama (raised by a banker) came to believe CD depositors should be paid next to nothing.
Having to pay 4% interest (even though inflation is far higher) is something banks hate.
Banks believe depositors should get less than 1% on their money and credit card users should pay 18% to 34% on that money.
“Now, since returns have already been evaporated by the rate hikes, if rents start to drop significantly, or rates continue to go up, then you will have a wave of foreclosures which will put several more banks out of business.”
In addition to that, the lowering of the market value of these assets that banks have on the books will put a big squeeze on their balance sheets since they have to use mark-to-market accounting. It could actually make some insolvent.
And if they have to start selling repossessed properties that’ll sink the values even further. Thus causing a snowball effect.
We’re in for a rough ride.
Since you’re a CRE investor, (I am too), what are you doing to protect yourself? Just curious.
Your “request” should not be an option at this time. Inflation must be put down, and raising interest rates seems to be the only tool that can accomplish this with the least amount of overall pain.
Many people are squealing for the interest hikes to stop, but without severely contracting the economy, what other realistic way can inflation be brought under control?
We’re reaping what we sowed by dropping interest rates to nothing in order to stimulate our economy.
Seems like that would be a good compromise. Although the other side of the issue is that consumers are getting eaten alive by higher priced goods and services.
Yep...those debt instruments aren't treating investors very kindly right now.
I have two mortgage loans in that range - fixed rate. One at 2 1/8% - the other at 2 1/4%. Both over 15 years.
Some firms have tried ordering their workers to show up at the office.
The best workers disappear to greener pastures—and what is left are obedient serfs.
Commuting is a great way to waste time, increase stress and make your life miserable.
Anyone who had to commute and then stopped commuting figured that out in a hurry.
Some firms have tried ordering their workers to show up at the office.
The best workers disappear to greener pastures—and what is left are obedient serfs.
Commuting is a great way to waste time, increase stress and make your life miserable.
Anyone who had to commute and then stopped commuting figured that out in a hurry.
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