Friday, February 01, 2008

Goldman: CRE Prices May Fall 25%

by Bill McBride on 2/01/2008 10:26:00 AM

From Bloomberg: Goldman Says Banks May Face $60 Billion in Writedowns

Commercial real estate prices may fall 21 percent to 26 percent from current levels, resulting in writedowns for banks of about $20 billion, Goldman Sachs said today in a report.

Home price declines will probably drive defaults in non- traditional loans such as Alt-As, which often include limited or no income documentation, resulting in $40 billion in markdowns ...
We've moved way beyond subprime. The price declines for CRE will lead to more defaults (since owners can't refi), and this will impact many small and mid-sized lending institutions with high CRE loan concentrations.

It was just yesterday that the Comptroller of the Currency John C. Dugan expressed concern about CRE concentrations at community banks.