The latest US labour report has found that over 350,000 new jobs were added to the economy, — and in a few weeks, those numbers will be revised downward, as has been the case for the past 12-13 months or so. Each glittering report is later found to be something less than gold. And looking into the numbers finds an uptick in govt hiring and part-time work. But, hey; the stock market is doing great and nothing else matters. Except it does. As the case of commercial real estate shows.
No wonder some companies are clamoring for employees who were forced to work remotely to now come back. There is an enormous amount of commercial real estate debt that is coming up for refinancing. 2019 is not coming back. There will be fallout. There may well also be a lot converting of office space into residential to further the 15-minute city ambitions of the central planners.
UnHerd Reader
3 months ago
Residential property prices aren’t going anywhere before the election unless rates really go down. No one’s selling because they don’t want to switch from a 2% to 7% mortgage and any new housing is still going to take a while to produce.
Mustard Clementine
3 months ago
I suspect that people aren’t really absorbing the exorbitant increases to the cost of mortgage and other personal debt as much as it may seem. I think the extent to which people are willing to literally beg, borrow and steal (thinking of the Tik Tok investors/realtors I see, trying to dupe the last greater fools here in Canada to catch the falling knives they are holding), counting on rates returning to the record lows they see as “normal”, is greatly underestimated.
As a leftover from years of those silly low interest rates, people are simply all too willing to take on more and more absolutely ruinous debt on the assumption that their assets will soon enough start to inflate at the entirely unsustainable rates they became all too used to, and thus it will all be okay and they will never really have to pay for it.
Much like, on a wider scale, those keeping depreciating commercial real estate on their books on the assumption that things will go back to the way they were soon.
It will all start crashing down when people realize that even when rates start coming down, they probably won’t come down anywhere near as low as they were, or not fast enough for them to keep holding on, and they truly can’t hold on any longer.
Something in the air just feels kind of crashy, like that may finally happen pretty soon.
Susan Grabston
3 months ago
Yes and there’s another banking crisis in the offing. It’s a crock of merde.
Even worse is the reduction in real estate tax that large cities will reap when the prices of all that expensive commercial real estate gets marked down by about 50%.
Christopher
3 months ago
Claiming inflation has been licked only means already high prices will continue to rise slower. Biden is toast.
Excellent piece, but overly focussed on the American market. Germany and the Nordics are also in trouble (https://www.reuters.com/markets/europe/sweden-braces-property-storm-clouds-darken-2023-09-15/), and world waits with bated breath to see if last week’s collapse of Evergrande, the Chinese commercial real estate company, will prove to be systemic.
The latest US labour report has found that over 350,000 new jobs were added to the economy, — and in a few weeks, those numbers will be revised downward, as has been the case for the past 12-13 months or so. Each glittering report is later found to be something less than gold. And looking into the numbers finds an uptick in govt hiring and part-time work. But, hey; the stock market is doing great and nothing else matters. Except it does. As the case of commercial real estate shows.
No wonder some companies are clamoring for employees who were forced to work remotely to now come back. There is an enormous amount of commercial real estate debt that is coming up for refinancing. 2019 is not coming back. There will be fallout. There may well also be a lot converting of office space into residential to further the 15-minute city ambitions of the central planners.
Residential property prices aren’t going anywhere before the election unless rates really go down. No one’s selling because they don’t want to switch from a 2% to 7% mortgage and any new housing is still going to take a while to produce.
I suspect that people aren’t really absorbing the exorbitant increases to the cost of mortgage and other personal debt as much as it may seem. I think the extent to which people are willing to literally beg, borrow and steal (thinking of the Tik Tok investors/realtors I see, trying to dupe the last greater fools here in Canada to catch the falling knives they are holding), counting on rates returning to the record lows they see as “normal”, is greatly underestimated.
As a leftover from years of those silly low interest rates, people are simply all too willing to take on more and more absolutely ruinous debt on the assumption that their assets will soon enough start to inflate at the entirely unsustainable rates they became all too used to, and thus it will all be okay and they will never really have to pay for it.
Much like, on a wider scale, those keeping depreciating commercial real estate on their books on the assumption that things will go back to the way they were soon.
It will all start crashing down when people realize that even when rates start coming down, they probably won’t come down anywhere near as low as they were, or not fast enough for them to keep holding on, and they truly can’t hold on any longer.
Something in the air just feels kind of crashy, like that may finally happen pretty soon.
Yes and there’s another banking crisis in the offing. It’s a crock of merde.
Even worse is the reduction in real estate tax that large cities will reap when the prices of all that expensive commercial real estate gets marked down by about 50%.
Claiming inflation has been licked only means already high prices will continue to rise slower. Biden is toast.