History repeats itself AND this time is different...
The commercial real estate loans held by the US banking sector have been marked by confusion and, in some cases, paranoia since the very beginning of the credit crisis. A sampling of the headlines highlights the concern for this sector which generally has not changed...
-- Office Space Is Emptying Out (WSJ)
-- Plight worsens for commercial property sector (FT)
-- Economic Data Point to More Bank Pain (Barron's)
-- Commercial Property Bust Threatens U.S. Banks (Forbes)
-- US banks warn on commercial property (FT)
-- Commercial Real Estate Portends Crisis (WSJ)
The commercial real estate loans held by the US banking sector have been marked by confusion and, in some cases, paranoia since the very beginning of the credit crisis. A sampling of the headlines, which made their way to the mainstream financial media at the time highlights the concern for this sector which generally has not changed.
While the prognosticators at the time were not entirely accurate, the size of the sector, as well as its importance to the banking system and CRE financing still warrant significant attention. ...while the sector has not lived up to the doomsday predictions, there is still a risk of significant losses.
The time table for deleveraging will vary dramatically depending on the ability of the various institutions to take write-downs and reserve for losses. Our analysis shows that many small and some medium sized institutions remain unprepared for the harsh realities ahead.
^^^^^ Everything above was written by Harris Trifon 12+ years ago but could be published today without missing a step. The headlines cited were from 2008-09 as real estate markets spiraled into a generational credit crisis.
i.e., history repeats itself.
However, today's market is much different than before. After the GFC, concerns were squarely focused on credit quality. But today's concerns are largely around interest rate risk and depositors' ability to withdraw funds quickly from their bank accounts.
i.e., this time is different.
You can view the entire article on CRE and the US Banking Sector here.
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