Elon Musk sounds the alarm on real estate, warning a spike in defaults on mortgages and commercial loans could hammer banks
was"just a blip" — and there was a"much larger timebomb" in the form of CRE loans on banks' balance sheets.
The finance guru cautioned that loan defaults could spike due to higher borrowing costs, and real estate prices could fall due to softer demand. Banks' CRE portfolios could slump in value as a result, putting pressure on lenders to raise fresh capital to shore up their finances. That's what spooked SVB's depositors, sparked a run on the bank, and spurred the federal government to take control of the lender.."Many cities have high office vacancy rates.
The tech billionaire seems worried that banks' commercial real estate loans and mortgages could tank in value. He appears concerned that higher rates, tighter lending standards, a looming recession, and the remote-working trend might weigh on demand for certain properties, pull down prices, cause a wave of defaults, and deal a heavy blow to the institutions that hold those loans.the key role that smaller lenders play in the construction and real estate sectors.
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