December 21, 2023 9:06pm | 2 minute read
Option 101: Beginner’s Guide
Want to become an options master? Options expert Nic Chahine’s free report includes 4 perfect tips for beginners, the secret to earning 411% in options, and his proven success. Provides access to ‘plans’. Get your free copy of Options 101: The Beginner’s Guide as soon as possible.
A possible collapse of the commercial real estate sector, the biggest since 2008, could cost U.S. banks up to $160 billion.
what happened: A study by researchers from USC, Columbia University, Stanford University, and Northwestern University assessed the impact of continued high interest rates on the commercial real estate industry and the U.S. banking system, Business Insider reports.
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The study, “Monetary Tightening, Commercial Real Estate Crisis, and U.S. Bank Vulnerability,” uses a model to predict that the Federal Reserve’s aggressive interest rate hikes in 2022 will affect assets such as stocks, bonds, and commercial real estate. We analyzed the impact on
According to the newspaper, 14% of all loans and 44% of office loans are in negative equity due to the decline in real estate values due to interest rate hikes and remote work, meaning that their current value is less than the loan balance.
SEE ALSO: Jim Cramer’s advice on taking advantage of rising stock prices during a bull market: “Please, don’t do anything.”
Why it’s important: This could lead to default rates for all commercial real estate loans of 10% to 20%, which is on the lower end of the estimated default rate during the Great Financial Crisis. As a result, banks could face losses of about $160 billion.
The study shows that in a scenario where interest rates remain high and real estate values do not recover, default rates could reach or exceed levels observed during the Great Recession.
Other experts are concerned about the commercial real estate sector, which will soon be saddled with about $1.5 trillion in debt. This could cause further losses for banks and make people worry about another run, similar to what happened to Silicon Valley Bank and other financial institutions earlier this year.
The researchers concluded that this exposure exposed banks to significant solvency risk.
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Option 101: Beginner’s Guide
Want to become an options master? Options expert Nic Chahine’s free report includes 4 perfect tips for beginners, the secret to earning 411% in options, and his proven success. Provides access to ‘plans’. Get your free copy of Options 101: The Beginner’s Guide as soon as possible.
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