Regional banks in recent weeks have been reporting high net charge-offs due to commercial-property exposure. At PNC Financial Services, for example, they were more than $50 million in the first quarter, slightly less than $54 million in the fourth quarter of last year but much higher than about $10 million one year earlier.
Office loans were a contributing factor. “The problem you have in office is, in many instances, there is no cash flow at all,” PNC Chief Executive Bill Demchak said on an earnings call. “It is really a unique animal at the moment.”
The financial upheaval in the office market is pressuring U.S. banks, insurance companies and other lenders. Commercial real estate losses in the fourth quarter at New York Community Bancorp sent shock waves down Wall Street evoking memories of bank failures last year.
More than $38 billion of U.S. office buildings are threatened by defaults, foreclosures or other forms of distress, according to data firm MSCI. That is the highest amount since the fourth quarter of 2012 in the aftermath of the 2008-2009 financial crisis.
Who would have predicted the death spiral of quality of life in the "prime" office settings of say 2000? Insane homeless defecating in the street? Dangerous subways, with nuts pushing people on tracks., or simply hitting someone for no reason. Cannabis smoke pervading all sidewalks. Huge encampments of "homeless" in public areas, fouling common recreational spaces. Unpunished, rampant shoplifting. Wild minimum wage laws raising fast food and inexpensive restaurant meals to astronomical levels. Massive roadway congestion. Unreliable public transportation. Hordes of unruly ....migrants....cluttering streets in dangerous mobs. In my single family home in nearby city to downtown, I experience none of these treasured urban experiences.
@LemurElianaRepublican2wks2W
If rates stay elevated and the work from home trend continues this will be the next 2008 style recession and most Americans have no idea. Structure your portfolio appropriately. LOTS of money to be made in the next 48 months.
Some experts are predicting a huge number of bank failures driven by real estate if the 10-year bond rate hits 5%. That chart with the significant drop in pay-offs seems to support the thesis.
@TautPragmaticForward2wks2W
Could this be the "Black Swan" event that triggers the next recession?
This is THE ONLY black swan event you should care about. The wars are a distraction. After the election you will start hearing about this way more. Ive been following this story since covid. All the biggest and smartest funds are positioning for this. To make billions. The average American will wonder why this happened and I plan to make millions off the crash. If it doesn't happen that's fine. But all signs point to a 2008 style crash or worse unless rates go back to where they were before which can't happen bc of inflation.
@BurritosJohnLibertarian2wks2W
Instead of building businesses that are real, solid, sustainable and have real value. All the pandemic did was speed up the evolution, recognition and reality that almost every ‘white collar’ job can be executed remotely with little or no effect on results.
@ObsessedDoughnutForward2wks2W
Interesting thoughts, I’m wondering what happens to all those white collar jobs when AI gets added in?
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