REAL ESTATE NEWS — Los Angeles commercial real estate billionaire Tom Barrack has warned that our response to coronavirus is placing the entire real estate industry on the brink of collapse. He alerts that this cycle could cascade into chaos if it is not addressed properly. #realestate #collapse #losangeles #dtla
If the real estate market is not fixed quickly, Barrack says that “The economic impact, magnified by widespread total industry shutdowns throughout the American economy, could be exponentially worse than the economic effects of the 1987 crash, September 11th attacks and 2008 recession, combined.” He says that the long-term impact on the economy could be “catastrophic.” Stock traders have agreed with Tom as they’ve slashed the value of shares in REIT real estate investment trusts by 42%. Mall values have dropped by 61%.
Anyone can now see that the Fed is out of ammunition, and now has insufficient power to boost the economy. Even though the Federal Reserve lowered the rates it controls to basically zero amid this crisis, would-be borrowers have gotten zero benefits. In fact, the much-watched Freddie Mac index of 30-year, fixed-rate mortgages showed interest rates jumping from a record low 3.29% on March 5 to 3.65% two weeks later. | LOFT LENDERS
Barrack says that the unemployment lines have already grown, and he expects, the length of these lines to explode on April 1, as the rent checks and mortgage payments supporting the commercial real estate market come due amid a breakdown of public trust in the economy.
Mortgage lenders have lost trust in the economy, which is one reason why interest rates have not fallen in response to the Fed rate cut. Development of new real estate is in jeopardy of seizing as a significant chunk of American commerce shuts down and grinds to a halt.
Barrack’s message is further reinforced by the news that billion-dollar megaprojects like OceanWide Plaza in Downtown L.A. had already been unable to obtain funding before the recent crash. Right after they finally found a new owner, buyer SPF Capital International Limited, the coronavirus crisis happened, delaying the $1B sale of the incomplete project.
Barrack calls for a collaborative solution with support of federal government policy to ensure stability moving forward.
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Q: What is happening with Los Angeles real estate and coronavirus? A: The L.A. Loft Blog has provided several updates on the health crisis and economic impact.
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