Interesting piece from Deutsche Bank on rapidly deteriorating Construction loans. DB predicts that “construction loans will be the epicenter of bank loan problems” • By far the riskiest type of loan product in bank portfolios; • Substantial portion represents loans to homebuilders; • Market currently penalizing properties with vacancy issues extremely severely; • Newly constructed (or only partially constructed) properties are the poster children for vacancy problems in CRE; • Values of most newly constructed properties are down massively; • Expect extremely high default rates and extremely high loss severity rates, both likely to be in excess of 50%; •...