Banks, Commercial Real Estate, Extend and Pretend

 Some bank stocks are the functional equivalent of ticking time bombs.

That’s because many have significant holdings of commercial real estate (CRE) properties that, if valued at current market rates, would wipe out the banks’ net worth. 

Many vulnerable banks have been able to avoid this fate—up until now—by conspiring with their mortgage lenders to engage in a practice known as “extend and pretend.” 

This practice involves simply extending the original loans while pretending that the properties’ market prices haven’t plunged significantly.

This practice will become increasingly difficult to pull off, however, as more CRE properties come up for sale and their true value is revealed for all to see. 

Mark Hulbert MarketWatch 12 August 2024

https://www.marketwatch.com/story/banking-stocks-for-those-who-worry-about-a-banking-crisis-bfd39f9b

The World’s Empty Office Buildings Have Become a Debt Time Bomb

The ‘Extend and Pretend’ Real Estate Strategy Is Running Out of Time

https://englundmacro.blogspot.com/2023/06/the-worlds-empty-office-buildings-have.html

 

Still Messier with CRE Loans. So let’s extend and pretend

https://englundmacro.blogspot.com/2024/07/still-messier-with-cre-loans-so-lets.html