Comment by bombcar
2 days ago
I should have mentioned a bit more - residential real estate (e.g., your house) is valued on comps for the purposes of a mortgage backed by that property alone - commercial real estate is valued by the local rent multiplier and mortgages are against bundles of it, or the entire company.
So (simplified) an "empty building, but it rents at $2k a month" is valued at 200k say; if you drop the rent to $1500 and now are getting rent paid, the building is valued at $150k.
They're not stupid, they're watching the vacancies and cash flow also, but it's over a bunch of properties, not just one. A single-family landlord who owns one property will start to feel the pain quite quickly of an empty building (and even they should plan for 20% vacancy, one year out of five).
But … none of this is commercial real estate? It’s all single family homes
This, and it is already happening in as we speak. London, Hong Kong, South Korea ( a little different but all the same ) Vancouver, Sydney. Basically anywhere you see housing bubble.
The trigger of re-evaluation also hurts banks's balance sheet. Crediting Rating agency, a whole lots of other financial institution. i.e Their interest is to not let it fall.
Banks? Banks don’t buy up houses, banks are what helps individuals buy houses. Again this just sounds like someone who recently watched the big short