Risk! A short word that keeps the world exciting and dangerous and ultimately destroys us all. In these uncertain times, we pine for the totems of our simple past—like the risk of massive real estate bubbles.
It would be simplistic and irresponsible for us to simply yell at you, the consumer, “Ooo, ahh, property bubbles once again, just like in the past, when it crashed our economy, woo, wahoo, everyone be scared!” We’ll leave that sort of fearmongering to lesser blogs. The reality is that this current rising real estate bubble is in commercial real estate (CRE), which is totally different from the residential real estate bubble of the past decade. We can all be proud to live in a nation in which all Americans may have the chance to experience a real estate bubble in each and every sector of the market in their lifetimes.
Yesterday, Thomas Curry, who has the extremely official title of “Comptroller of the Currency,” warned that banks—particularly small ones—are making too many dangerous commercial real estate loans. From the FT:
Mr Curry suggested CRE was of even greater concern to regulators than both car loans — an area into which some banks have expanded aggressively — and lending to already-indebted companies...
[A Morgan Stanley report] said the retail sector was especially vulnerable. “We are already seeing increased defaults on loans secured by shopping malls, which is a trend we expect to continue.”