The Real Estate Bust Is Far From Over

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investorzzo's picture
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Joined: Nov 7 2008
Posts: 1182
The Real Estate Bust Is Far From Over


The folks at Deutsche Bank see price declines of 35 to 45 percent
and maybe more in commercial property, due to the large number of loans
coming due between now and 2012 that will not be able to be refinanced.
Not only are loan delinquency rates up and rents down, but the go-go
years of aggressive loan underwriting are gone. The interest-only, high
low-to-value loans that drove capitalization (cap) rates to the
five-percent range are history. Property buyers who are required to put
more money down will offer significantly less for the same net
operating income to achieve the required return on investment. Thus,
cap rates for properties in Las Vegas, for instance, are closing in on
9 percent according to a local appraiser and may be on their way to 10

But bankers are in a state of denial, according to real-estate pro
Andy Miller, who spoke at Doug Casey's Crisis & Investment Summit
in Las Vegas recently. Miller's been in the business for 30 years and
hasn't seen a property financing market this tight. But the current
note holders are saying "don't worry, be happy." Miller told the
capacity Casey crowd that bankers show him the door when he rains on
their parade.

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