Wave Of Up To $1 Trillion Commercial Real Estate Loan Defaults Looms Within Next 2 Years, Financial Services Industry Veteran Warns: 'Going To Be A Very, Very Ugly Market'
Portfolio Pulse from Shanthi Rexaline
Cantor Fitzgerald CEO Howard Lutnick predicts a grim future for the U.S. real estate market, with up to $1 trillion in commercial real estate loan defaults expected within the next two years. Despite potential slight rate decreases, Lutnick believes real estate equity and REITs will face significant challenges, with many defaults and a 'generational change' in real estate. Approximately $2.77 trillion of commercial real estate debt is due to mature between 2023 and 2027, with refinancing difficulties anticipated due to high interest rates and declining property values. Morgan Stanley and Fitch reports support the view of a challenging environment for commercial real estate.
January 21, 2024 | 10:15 pm
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The Real Estate Select Sector SPDR Fund (XLRE) may face downward pressure due to the predicted real estate market challenges and loan defaults. The fund has already seen a decline in January, reversing some gains from 2023.
XLRE, which represents real estate equities, is likely to be negatively impacted by the predicted increase in loan defaults and overall market challenges in the real estate sector as outlined by Howard Lutnick. The fund's recent performance and the broader market outlook suggest potential for further declines.
CONFIDENCE 75
IMPORTANCE 90
RELEVANCE 80