GLOBAL REAL ESTATE 🏠 BUBBLES

There is $1.5T in commercial real estate debt maturing in the next 3 years. The bulk of this debt was financed when base interest rates were near zero. This debt needs to be refinanced in an environment where rates are higher, values are lower, & in a market with less liquidity.

I have joined @TheRERoundtable in calling for a program that provides lenders the leeway and the flexibility from regulators to work with borrowers to develop responsible, constructive refinancing plans. A similar program was implemented in 2009 and during the heat of COVID-19.

This program will provide time for the markets to settle & enable the private sector to address the deleveraging that is required to reflect the new interest rate regime. We can avoid unnecessary economic pain & a bailout, like what we saw in the '80s with the S&L Crisis.

If we fail to act, we risk a systemic crisis with our banking system & particularly the regional banks, which make up 80% of RE lending. There will be pressure on our municipalities, which derive over 70% of their tax revenues from property taxes.

And we will exacerbate our nation’s housing shortage as there will be little financing for new development. We have been experiencing a proverbial slow-moving train wreck that has been picking up speed throughout this past year with the unprecedented spike in interest rates.

The events of the last couple of weeks highlight that the train is now out of control. We need to slow the train down and take the proper precautions to minimize the damage. You can hear more in my interview with the @SquawkCNBC team: youtube.com/watch?v=S21Vuy…

@ScottRechler Why should you be allowed to refinance debt at a cheaper rate than families trying to buy homes *to live in*? And how can you be so shameless as to suggest the US taxpayer should be backstopping you?

@ScottRechler Sure, but how much of it is hedged? Just saying that there is X or Y unrealized losses does not tell the whole story. SVB had no hedge, so they went under. Not all institutions are as irresponsible.