September 30, 2009
Goldman Sachs has revised its expectations for CRE losses, and is concerned about exposure of banks and insurers with lots of CRE assets on their books. The Bank of Americas, Wells Fargos, and JP Morgans of the world are generally considered to be “too big to fail”, but community and regional banks holding a large percentage of commercial real estate assets will get slaughtered.
“Prices have yet to stabilize and thus are likely to overshoot our original estimates further,” Goldman analysts said in a report.
Appraisal values have fallen 25 percent. Goldman expects a decline from peak levels in 2007 of 40 percent to 42 percent, a much steeper declined than the 28 percent it expected.
Sales prices have plunged 39 percent from their peak prices verses Goldman’s prior estimate 24 percent.
At the same time, vacancy rates have risen 35 percent versus the 17 percent Goldman had expected. Rents have fallen by 9 percent, translating into fundamentals that have deteriorated by more than twice the rate Goldman anticipated.
- Congressional Oversight Panel Issues Report on CRE
- Bair: Bank Charge Offs Related to CRE Higher in 2010
- Moody’s Commercial Property Price Index Continues Fall – Down 40% From Peak
- Next Wave of Stress Tests To Focus on CRE
- Prudential First Quarter CRE Report