Apr 4, 2010 10:24am
Greenspan: Commercial Real Estate Bubble Has Already Popped
EmailFormer Fed Chairman Alan Greenspan believe a bubble in commercial real estate has already popped. “Real estate prices generally are down 50%,” Greenspan told me in my exclusive “This Week” interview. “With prices already down and adjusted, if we were going to get severe secondary reactions, they would have occurred, and they would have occurred if it weren’t for the fact that the rest of the economy is showing some degree of buoyancy.”
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Considering how wrong he was the first time around I would not get too comfortable with his opinions. Besides, we have not seen the worst of commercial real estate, it is very deep and very hard to decipher. Values are down and rents will remain lower for the foreseeable future, which will keep property values down. That being said, when mortgages are due and the value is lower than the mortgage, you do the math. It is not like the housing market.
Posted by: Jake Adler | April 4, 2010, 12:22 pm 12:22 pm
@Jake
Agree with all you said, however banks are holding on to their foreclosed assets and will become RE operators until prices stabilize. What once was shunned upon by lenders is quickly cementing as the strategy for this cycle.
Posted by: Ander Vazquez | April 4, 2010, 3:19 pm 3:19 pm
America Remember you voted the dummy in the White House things will get worse then better pity the younger generation. Real Change ???? LOL
Posted by: Joeray | April 4, 2010, 6:13 pm 6:13 pm
He was the better of the two dummies.
Posted by: summarex | April 4, 2010, 9:10 pm 9:10 pm
Look, did any of you ever listen to Greenspan speeches before congress when he was chairmen. He warned them of the Real Estate bubble. But they did not listen. So please do not crucify this man. The thing he did not do was to take action when congress did not. He left credit loose for the rest of the economy. It was congress that had to tighten the strings on the banks. They failed so before you cast a stone, please do your own research instead of jumping on someone else’s band wagon.
Posted by: Jack | April 5, 2010, 11:30 am 11:30 am
Seconded the motion. In the real score banks are not seeing in the other side that there are business entities were hammered and thus it in real estate.
Posted by: Flats To Let Glasgow | April 5, 2010, 6:26 pm 6:26 pm
That would be a big “maybe”.
On the other hand, the commercial bubble could pop in the near future, creating another wave of bank problems.
Posted by: Rick McDaniel | April 6, 2010, 9:38 am 9:38 am
Greenspan’s comments miss the point of the speculative CRE crisis. Sure, values have likely bottomed out but that’s not the issue that analysts are concerned about. The issue is the maturation of CMBS loans and where owners will get debt to refinance. Some banks will serve as operators, while others are extending loans 2-3 years hoping that the secondary markets come back by then. A crisis could still develop, although it is looking less likely.
Whoever defended Greenspan is not well-informed of the timing of this crisis. It is difficult to single out one person (greenspan) as the main cause of the RE bubble but AG is certainly more responsible for the collapse than anyone else. He reacted too late.
Posted by: CRE | April 6, 2010, 1:58 pm 1:58 pm
Many of our clients for commercial loan modifications are really hurting. These small business owners have seen the values of their properties plunge by 50% and have lost their life savings.
Posted by: Ted Karsch | April 7, 2010, 1:33 pm 1:33 pm
I stongly beleive that when Mr. Greenspan was evaluating the economy he did inform congress not to increase the rate it would only drive the inflation upward that would impede the flow of consumation on an overall stand point of view you can define the economy for what you think that its worth however the truth to the matter if consumation is tying up spending less jobs who will be hurt the most there has to be an exchange for goods and services in order to have a functional economy.
Posted by: Karl | April 8, 2010, 1:31 am 1:31 am
summerex:
You can’t blame the Obama administration for the unregulated, cowboy banking practices that led to the recession, the mortgage crisis and the impending CRE crisis. This is Bush administration fallout and it will happen — as soon as the CRE loans begin to come due. Expect a 10% market drop, as opposed to a 30% or more.
Posted by: Tank Risco | April 16, 2010, 1:41 pm 1:41 pm
Alan Greenspan pumped up the equities markets, catering to Wall Street. By playing word games and manipulating the rates and flow of Fed money, while Fed Chairman, he created the bubbles. He did and said whatever was required for years to make Wall Street happy.
Bill Clinton is resposible for much of the cheap real estate loans provided to the poor who could not afford it. And thank Congress as well.
Oh yeah, Bill CLinton years seemed good as we all lived off of the false profits of real estate and equity bubbles.
Now it is coming back to haunt us.
Posted by: Dwade | May 15, 2010, 8:09 pm 8:09 pm