INCREASE
$517 billion
BREAKING : U.S. Banks
Unrealized losses in the U.S. Banking System increased to $517 billion in Q1
Losses Pile Up in Top-Rated Bonds Backed by Commercial Real Estate Debt...Loan defaults could reach Great Depression-era levels if rates stay high
For the first time since the financial crisis, investors in top-rated bonds backed by commercial real estate debt are getting hit with losses.
Industry analysts warn of more pain to come in safest CMBS
A National Bureau of Economic Research paper warned commercial real estate loan defaults could reach Great Depression-era levels if rates stay high.
USC Finance Professor Erica Jiang discussed the risks on Yahoo Finance Live.
- Jiang noted falling property cash flows, declining values, and refinancing challenges raising distress, especially for offices, multifamily, and hotels.
- She says "rising interest rates make it very difficult" to refinance, causing rollover issues.
- She highlighted offices as particularly exposed, with 45% of office loans underwater, meaning the property value is below the loan amount.
- This makes refinancing unlikely as it "has high default risks."
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