Watchdog Group Warns of Commercial Real Estate Defaults

A special congressional panel's recent report is sending shock waves throughout the commercial Real Estate Industry, not to mention giving bankers much worry and grief. It is also creating headlines in the media from coast to coast.

The message from the Congressional Oversight Panel, which is charged with overseeing the 700 Billion Dollar bailout program should come as no news to many, Housing watch and many other media outlets have been reporting the troubles for months. The prediction: "A significant wave of commercial real estate defaults could create a downward spiral that could touch the lives of nearly every American".

"Over the next few years, a wave of commercial real estate failures could threaten America's already weakened financial system", reports the panel. "The Congressional Oversight Panel is deeply concerned that commercial losses could jeopardize the stability of many banks, particularly the mid size and smaller banks, and as the damage spreads beyond individual banks that it will contribute to prolonged weakness throughout the economy.

Dr. Elizabeth Warren, the Governments head of the bailout, states plainly "Well it's pretty bad". Nothing more needs to be said.

The New York Times recently reported that the losses in the commercial market could be well over $300 Billion in the next year alone. Trade organizations claim that the panel has overstated the problem, however, I find this statement to fall on deaf ears, especially mine.

By 2014 over 1.4 Trillion dollars of loans will expire and need to be refinanced. Half of those loans are already underwater, as stated by the panel.

This is one time I think the Government's forecast is closer to the truth than the trade, and this problem is looming like a "class 4 hurricane" waiting to come ashore.