Bidenomics Strikes Again! First Office CRE Was Crashing, Now It Is Multifamily CRE (Return Of “Extend And Pretend”)

Confounded Interest ^ | 05/07/2024 | Anthony B. Sanders

[Kaiser8408a]

Lightning strikes TWICE!

One year after regional banks crashed and burned due to the combination of tumbling debt/treasury prices coupled with cratering commercial real estate loans, fears about the current state of Commercial Real Estate – where most offices still see tenants at best 3 to 4 days a week and are literally burning through rents – appear long forgotten. Is that sensible?

For one answer, we turned to the latest report from Goldman’s REIT/CRE expert Chandhi Luthra who has published a visual assessment of the state of CRE in 2024 in terms of loan maturities, 2023 extensions, and property and lender groups. She also looks at the latest transaction and leasing volumes, and shares several key takeaways.

There are ~$4.7tn of outstanding commercial/multifamily mortgages outstanding, according to the Mortgage Bankers Association’s 2023 Commercial Real Estate Survey of Loan Maturity Volumes. More specifically in 2024, $929bn of CRE mortgages are expected to mature, ~20% of ~$4.7tn total commercial mortgages outstanding. In terms of property type, multifamily and office account for ~27% and ~22% of commercial mortgage maturities in 2024 respectively. In terms of lender type, banks hold ~47% of debt maturing in 2024, followed by CMBS at ~25%.

It is worth noting that 2024 commercial mortgage maturities are pushed up by 2023 extensions. As shown in Exhibit 3, among the CRE loans scheduled to mature in 2023, ~$610bn were refinanced, with ~$300bn pushed into 2024 and the remainder into future years. As a result, the total CRE refinancing volume is expected to be ~$929bn in 2024.

[babble-on]

Oh no, disinflation!!

[marktwain]

I recall the ads saying commercial real estate mutual funds were the best and safest possible investment...

[Fido969]

Sounds like a pump and dump.

[babble-on]

Housing prices are too high!! Everything is terrible!!
Housing prices are falling!! Everything is terrible!!

[marktwain]

Sounds like a pump and dump.

Highly unlikely. The ads were long before the Covid scare and widespread "work from home".

They simply assumed the then current model would continue forever.

Nothing lasts forever.

[PGR88]

Those blows helped increase multifamily assets classed as distressed to almost $10 billion at the end of March, a 33% rise since the end of September, according to data compiled by MSCI Real Assets.

The problems with commercial real-estate are known, and obvious. Housing is less so.

The only problem is with owners/speculators who used zero-interest debt to buy up housing. Now they must refinance at higher rates. Given demand is generally not a problem, and that owners seem to be getting desired rent-increases, I don't see multi-family housing "blowing up"

[Mouton]

commercial real estate mutual funds were the best and safest possible investment...

Yeah. I recall I had a stock broker one time who used to say things like that about a particular stock issue. When his advice blew up, he would say, well, the market changed. Lots of that going around these days.

[Vaduz]

Bidenomics has a ticking sound to it for a reason.

[guest7]

"Sounds like a pump and dump."

[SaxxonWoods]

“One year after regional banks crashed and burned...”

The usual overwrought garbage.