Yeah it’s been going on a couple decades. And policy for it is mostly created locally rather than nationally.
In case anyone missed it, this is specific to commercial real estate. I’m pretty sure anyone who follows this market has anticipated a massive bubble burst following the remote work movement and given that [~20% of all commercial office space is sitting empty right now, the highest rate since ’91](https://www.wsj.com/real-estate/commercial/offices-around-america-hit-a-new-vacancy-record-166d98a5) and the fact that a lot of offices are massively under utilized with much of their staff working from home at least some of the week. The $700 billion in defaults suggested in the article sounds reasonable to me.
I’m a nerd on this topic so I took at look at residential housing for comparison and [the vacancy rate has been going down for years as housing costs have gone up. Right now it’s as low as we’ve seen it this century at 6.6% for rentals.](https://www.census.gov/housing/hvs/current/index.html)
Here’s another chart that shows [Total Housing Units in the United States / Population Level from Federal Reserve Economic Data](https://fred.stlouisfed.org/graph/?g=j9kH) to get an idea for the total housing market, not just rentals. It looks like the rate is stabilizing right around 544 units per 1,000 people after a long decline following the 2008 housing crash.
It makes sense that housing prices aren’t skyrocketing quite as much as they were a few years ago now that the inventory is stabilizing. Left to supply and demand alone commercial real estate would be dropping office rents, but instead we’re going to see large scale loan defaults first with the reduction in rents coming a year or three down the line.
3 comments
Yeah it’s been going on a couple decades. And policy for it is mostly created locally rather than nationally.
In case anyone missed it, this is specific to commercial real estate. I’m pretty sure anyone who follows this market has anticipated a massive bubble burst following the remote work movement and given that [~20% of all commercial office space is sitting empty right now, the highest rate since ’91](https://www.wsj.com/real-estate/commercial/offices-around-america-hit-a-new-vacancy-record-166d98a5) and the fact that a lot of offices are massively under utilized with much of their staff working from home at least some of the week. The $700 billion in defaults suggested in the article sounds reasonable to me.
I’m a nerd on this topic so I took at look at residential housing for comparison and [the vacancy rate has been going down for years as housing costs have gone up. Right now it’s as low as we’ve seen it this century at 6.6% for rentals.](https://www.census.gov/housing/hvs/current/index.html)
Here’s another chart that shows [Total Housing Units in the United States / Population Level from Federal Reserve Economic Data](https://fred.stlouisfed.org/graph/?g=j9kH) to get an idea for the total housing market, not just rentals. It looks like the rate is stabilizing right around 544 units per 1,000 people after a long decline following the 2008 housing crash.
It makes sense that housing prices aren’t skyrocketing quite as much as they were a few years ago now that the inventory is stabilizing. Left to supply and demand alone commercial real estate would be dropping office rents, but instead we’re going to see large scale loan defaults first with the reduction in rents coming a year or three down the line.
So far!