‘There’s a Lot of Agony Out There’: Munger on CRE

“A lot of real estate isn’t so good any more,” Munger said. “We have a lot of troubled office buildings, a lot of troubled shopping centres, a lot of troubled other properties. There’s a lot of agony out there.”

Berkshire Hathaway Vice Chairman Charles Munger has truly seen it all. At age 99, he’s an astute observer of markets and remains Warren Buffett’s right hand man.


Get the blog before anyone else…subscribe!


So when he sat down for a rare interview with the Financial Times this weekend, I couldn’t miss it.

Munger notes that many US banks are holding bad loans on commercial property. Those properties are declining in value due to higher vacancies and interest rates.

Loans for commercial real estate aren’t like residential mortgages. Instead of being fixed for 30 years, they usually must be refinanced every 5-10 years.

Banks are increasingly wary of CRE loans. From the Munger interview:

He noted that banks were already pulling back from lending to commercial developers. “Every bank in the country is way tighter on real estate loans today than they were six months ago,” he said. “They all seem [to be] too much trouble.”

If the refinancing happens at all, it will be at a much higher rate. If the owner can’t pay the new, higher payments, he may default.

That leaves the bank holding the bag.

And if the owner tries to sell, he faces a tough market.

Sales of office space are down 66% in the past year. There are no buyers at any price for vacant office space in NYC, according to a broker friend of mine.

Berkshire is staying away from this tough market. So is little old Francis — my real estate investments are in higher end apartments and fulfillment centers.

What’s the future for CRE? Leave a comment and let us know what you think!

This is the last blog for this week. I’m heading down to Kentucky tomorrow to visit my grandma!

See you on Monday, May 8th!

If you enjoyed this post, subscribe for more like this!

More on markets:

From $10 Billion to Zero — Late Stage Ice Age

Interest Rate Time Bomb May Kill Hedge Funds

To Riyadh, Hat in Hand

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

Misfits Market

I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $15 on your first order. 

Advertisement

3 thoughts on “‘There’s a Lot of Agony Out There’: Munger on CRE”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s