Small and regional banks remain most vulnerable to deeply troubled commercial real estate.
In recent congressional testimony Federal Deposit Insurance Corp. Chair Sheila Bair indicated the continuing correction in commercial real estate prices constituted the most prominent area of risk for FDIC-insured institutions. There is a danger that commercial property losses, coupled with further impairment of residential real estate portfolios, could lead to a significant regional banking crisis.
Commercial Real Estate Bust
The commercial real estate sector is currently under the greatest stress since the CRE crash in the early 1990s. Following its normal pattern of lagging the residential housing cycle by approximately one year, the CRE sector peaked toward the end of 2007. Since then CRE prices have plunged by approximately 35%.
The commercial real estate sector is currently under the greatest stress since the CRE crash in the early 1990s. Following its normal pattern of lagging the residential housing cycle by approximately one year, the CRE sector peaked toward the end of 2007. Since then CRE prices have plunged by approximately 35%.
Sounds like a good time to buy!
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