CRE walking backwards off a cliff............from Rico

CRE is walking backwards off a cliff.

CRE is a bigger "bubble" than the "sub-prime" residential bubble, and it will have a bigger CRASH, but it's not being talked about much.
- Heck, it 'might' panic the peasants and serfs...better keep telling them in the MSM (especially on TV) that a "recovery" is under way right now. Buy Bonds and Stocks!!

For anyone who detunes from "Prancing With the Stars, American Idiot" or ANY of the fake-but-could-be-real "reality" shows on TV, this is what is actually happening:

There will be a significant number of bankruptcies of Developers and a signiificant number of failures of Community Banks in the years ahead.
- 3,000 Community banks (about 40% of the US banking system) have toxic percentages of exposure to CRE loans. Instead of the "too big to fail" mantra we are ceaselessly bludgeoned with by the financial Talking Heads, think instead "too small to succeed." These smaller banks were essentially locked-out of the residential loan market, so became overexposed to C&D (construction and development) and CRE (commercial real estate) loans. Lucky them.

Last month Moodys (Moodys Delinquency Tracker) reflected the CMBS delinquency rate increasing at the fastest rate so far. All sectors tanked (hotels-office-multi.family) but retail was the worst of the lot. [chart]
- hotel occupancy is down 61%
- architectural billing has declined steadily since 2008 (they design C&D projects)
- CRE rents have dropped for an unprecedented five straight quarters
- mall and strip mall rents are declining while vacancy rates are the highest in 10 years (malls) and are hitting 18-year highs (strip malls)...and averaging 18% and climbing vacancy for ALL US office space
- CRE values have fallen to early 2003-levels, having dropped 40% below the Oct 2007 peak values...walking backwards

The really LARGE losses will start in 2011 and increase from there but the wave has started with the default rate for CRE mortgages held by all US banks more than doubling 4Q2009.
- The official FDIC list of "problem" banks was over 700 by the end of 2009 (compare that to the 2008 list of 252 banks). My best guess is that the "real" list is well over 1,000 banks....and that's the "official" list, the unofficial count will be thousand(s) plural. All small to mid-sized community and regional banks.
- Banks are currently 'telegraphing' to us what lies just ahead by having stopped all CRE lending! They must know something you don't know (well, in fairness, you aren't being told how bad it really is or how bad they think it really will get). [chart]

CRE loans typically have 5-10 year rollovers, and today over half (even most) borrowers do not qualify for rollover or refinance.
- Guess what happens to CRE prices when CRE borrowers start to walk away from "underwater" properties?

Using Obama-Soetoro's favorite words, it will be a financial disaster of "unprecedented" proportions. If you liked the "change" residential real estate gave us, you'll just LOVE this"change".....