Commercial Real Estate (CMBS) Delinquencies Surge: Will This Affect All Real Estate And REIT Stocks?

Commercial Real Estate (CMBS) Delinquencies Surge: Will This Affect All Real Estate And REIT Stocks?
Commercial Real Estate

Commercial Real Estate (CMBS) Delinquencies Surge: Will This Affect All Real Estate And REIT Stocks? The delinquencies in Commercial Mortgage Backed Securities (CMBS) surged to 7.15% in May. This is the highest delinquency rate since 2009. CMBS are bonds that hold mortgages of commercial real estate usually in different sectors. This worst performing commercial real estate sector is retail and hospitality. Will the problems in commercial real estate eventually spread to residential real estate and make the housing market crash? The housing market today and in the future is affected greatly by unemployment and business bankruptcies. Right now it seems the stock market is ignoring the huge problems in the economy.Hear the opinion of Sam Zell on what he thinks will happen in commercial real estate prices. Sam Zell is the chairman of Equity Residential (EQR) which is the 2nd largest residential REIT in the US with about 80,000 apartments. Are we closer to the top in real estate and when will it fall?


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  1. Number of retail space per capita exploded between 2018-2020 USA-EU because of low rate. So, now, rate will pick up soon enough, no buyers, tons of sellers. Bankruptcy for those who can’t pay debt by selling asset because demand is low. America all hell is about to break loose.

  2. Solid video, and thank you for making it!
    A few comments:
    – Regarding multi-family, I don't see a reason to suspend investment considering there are no current headwinds: growth of unemployment has peaked per latest BLS data, homebuilders activity has been growing, and perpetual QE will continue to inflate all asset prices. But yes, retail and even office space is a different story.
    – Covid has been an accelerator of change. I view the increase in auto sales as borrowing from sales that were going to happen later this year. Consumers who needed a car, had the time, and are not worried went ahead and bought.
    – Because of the absurd QE levels and purchase of junk bonds, the correlation between unemployment and chapter 11 may change. Additionally, the jobs lost may not be the well paid quality jobs that are core to businesses as there have been a lot of gig jobs created in the last decade, which may permanently affect the correlation observed in the chart.
    Again, great video, just presenting a possible development of the trends you illustrate.

  3. Great Analysis
    Very detailed and facts based.
    Agree with you 100%.
    First shock will be when extra unemployment benefit is cut in July.
    Then PPP loans will dry up by October.
    By January both Real Estate and Stock will be under
    Severe downward pressure.
    I expect minimum 50% decline in overall real estate prices.
    2008 crisis resulted in 25% price decline.
    The Covid 19m8s 5 times worse at least.
    50 % minimum reduction in both commercial
    and residential real estate prices.
    Unemployment will probably level off at 15%.
    The downward pressure on prices will be unbearable.

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