This is the VOA Special English Economics Report.
American housing collapse was a major cause of the recession. The housing
market is showing new life after three years of falling prices and too much supply.
But now there are worries that banks could face big losses next on business
example, one effect of a weak economy is less demand for office space. As a
result, property owners earn less and charge less in rent. This puts pressure
especially on owners who borrowed a lot money.
credit helped fuel an explosion of development.
The market hit a high point in two thousand seven.
late payments are growing. Almost three percent of commercial mortgages were reported
at least ninety days late between April and June. That was double a year earlier.
One major lender lost more than a
billion and a half dollars in the second quarter. Capmark Financial Group said
it might seek bankruptcy protection from its creditors. Medium and small banks also
face a growing risk.
hold one and a half of the three and a half trillion dollars in debt that
supports the commercial real estate market. Housing debt is much higher. Still,
around two trillion dollars in commercial mortgages are expected to come due
for payment within the next five years.
properties face two serious problems. One is falling prices -- down by one-fourth
since two thousand seven. The other is refinancing.
Most commercial real
estate loans have terms of ten years or less. They often end with a large payment,
a balloon payment, which owners usually refinance. But lower property values
and tighter lending requirements mean a harder time getting new loans.
One way to make capital available for new
loans is to sell mortgage-backed securities. But since last year there has been
little activity in the seven hundred fifty billion dollar market for commercial
mortgage securities. The Federal
Reserve recently extended into next year a loan program designed to get
investors to buy more securities like these.
United States is not alone. Commercial rents in Moscow, Hong Kong, Singapore
and Mumbai have fallen thirty percent or more.
housing sales, though, have improved in recent months, helped by lower prices
and a tax credit for first-time buyers. The S&P/Case-Shiller national index
of home prices rose in April, May and June. That was the first three-month increase
in three years.
that's the VOA Special English Economics Report, written by Mario Ritter. I'm Steve