Sarasota real estate braces for more despair, claims Eugene Ludwig whose dire predictions regarding commercial real estate “softness” are coming true…followed by more Sarasota homes for sale.
Sarasota business owners lay-off, liquidate & FACE foreclosure reality!
“Losses from commercial real estate will be quite high by historic standards.”
Eugene Ludwig, former Comptroller of the Currency, knows what he’s talking about!
He adds, “Hundreds of banks will fail or will be resolved over the course of the cycle.”
“Banks are expected to lose $300 Billion from their commercial real estate holdings.”
Hundreds of lenders representing billions in commercial real estate loans will simply fail unless they can get those bad commercial real estate assets off their books. Delinquencies on commercial mortgage loans rose to a record in the third quarter as unemployment rose and landlords struggled to retain tenants.
How Bad Is It Getting?
The percentage of Commercial loans at least 30 days past due rose to 4.06 percent from 1.17 percent a year earlier, the Mortgage Bankers Association said today. That’s the most since the group began tracking the data in 1997.
About 3.43 percent of bank-owned loans on offices, apartment buildings, shopping centers and other income-producing properties were at least 90 days past due, up from 1.38 percent a year earlier, the MBA said.
Banks are motivated to make deals on their delinquent commercial property portfolios, but there are two more things required to keep them from being taken over by the FDIC:
- Willing and experienced buyers who want to acquire commercial property at rock- bottom prices (there are PLENTY of these)
- Legitimate funding sources that can provide capital for these types of deals (such as private hedge funds and other non-traditional investment sources – there aren’t many of these).
Alarming Prediction
About Commercial
Commercial real estate prices are going to hit rock bottom this year. ‘Commercial properties, valued from residential properties, are valued by their net operating income, i.e. how much income the property produces for the owner.
The more vacancies a building has means the less the property is worth.
In Sarasota, more and more businesses are cutting jobs and going out of business, which means commercial properties have more vacancies. In effect, vacancies drive down property values.
Suddenly, more and more of my colleagues are getting up to speed with commercial real estate, ready to step in as they have with distressed residential properties.
Sarasota homes for sale hit the market when job losses and transfers force distressed sales. When people lose jobs or get hours cut, they stop spending. Sarasota business owners take the direct hit, forced to lay off even more people, go out of business…or both. Up and down Sarasota’s “TRAIL,” boarded up store-front windows prove continued hardship. If you own a Sarasota business, are you feeling the crunch? Are you concerned about Ludwig’s prediction? Share your thoughts below. If you have a “happy” experience or story to share about a Sarasota business (or sector) thriving today, please share it.
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