Big Short Investor Explains the Commercial Real Estate Crisis

'Big Short' investor Steve Eisman has warned of an impending crisis in U.S. commercial real estate on the back of high interest rates, declining property values, and a looming refinancing cliff. Like Michael Burry, Steve was able to predict the biggest housing collapse of all time in 2008... Did he just predict the Big Short 2.0?

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★ ★ CONTENTS ★ ★
0:00 The Commercial Real Estate Crisis
2:03 The Refinancing Crisis
3:29 Interest Rates Wreaking Havoc
5:20 Could Rates Come Down?
6:53 Defaults are Rising
7:40 Bank Stress
8:40 Crisis Averted?

DISCLAIMER:
Neither New Money or Brandon van der Kolk are financial advisers. The information provided in this video is for general information only and should not be taken as professional advice. There are risks involved with stock market investing and consumers should not act upon the content or information found here without first seeking advice from an accountant, financial planner, lawyer or other professional. Consumers should always research companies individually and define a strategy before making decisions. Brandon van der Kolk and New Money are not liable for any loss incurred, arising from the use of, or reliance on, the information provided by this video.

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[NewMoneyYouTube]

Thanks for watching guys! I appreciate your support :)
Lmk your thoughts on commercial real estate in the comments!

[bozolito]

For some reason I feel more alarmed when Steve Carell was explaining the looming crisis

[benjamindavidson]

I think a housing crash will happen because all those people who bought homes over asking price, although it was at a low interest rate, they are over their heads. They have no equity if the housing prices continue to go down, and if for whatever reason they cannot afford the house anymore and it goes into foreclosure because even if they try to sell, they will not make any money. I think this will happen to a lot of people especially with the massive layoff predicted for the future and the cost of living rising at a high speed.

[alicemendoza]

The fact that there is already an excessive amount of demand awaiting its absorption, despite how everyone is frightened and calling the crash, is another reason why it is less likely to occur that way. 2008 saw no one, at least not the broad public, making this forecast, as I'll explain below. The ownership rate was noted to have peaked in 2004 in the other comment. Having previously peaked in the second quarter of 2020, we are currently at the median level. Between 2008 and 2012, it dropped by 3%, and by the second quarter of 2020, it had dropped from 68 to 65.

[geraldt]

lnvesting in the stock market has historically provided higher returns than other forms of investment with the average annual return for the S&P 500 index, being approximately 10% over the past 3 decades. I've set aside $250k to start following inflation-indexed bonds and stocks of companies with solid cash flows, I believe it is a good time to capitalize on the market for long-term gains.

[BrentBestwick]

Converting commercial buildings to residential is very complex and expensive, but surely some of these properties will switch over.

[jonathangorham]

Fingers crossed the entire real estate market experiences a correction, not just offices. Housing affordability is insane.

[peejaydandoy]

If interest rates keep rising the average home buyer will not be able to buy a home. I was really hopeful of my investments this year, but all my plans have been disoriented, I've been studying the housing crashes and I realized some investors made millions from the recent 2008 recession and I was wondering if such success rate could be achieved in this present market. Any recommendations?

[talented]

A crash in the stock or real estate markets has less of an immediate impact on people's standard of living than inflation. That the market is so negative at the moment shouldn't be shocking. If we are to survive in this economy, we need assistance right away. The ETF and stock markets are still quite volatile, just like the property market. Now all that's left of my $370, 000 portfolio is ruins.

[leanbodycoaching]

You missed 2 other elements complicating this situation. I own 4 large apartment complexes in Texas. We locked in the loans at low rates, so that’s not where our struggle lies. Our insurance rates, along with everyone else’s jumped 80-100% this year due to the losses the insurers look last year. 50 insurers went out of business in flordia alone. And several big insurers now left California due to the risks. Secondly, although we are fighting this and may end up litigating this aspect, our property taxes in Houston jumped 80% too. So you see, it’s a confluence of events hitting real estate owners from more than just refinancing. We stopped all our distributions for the year to shore up cash in all our properties to hopefully weather the storm. But right now, the biggest threat we face is insurance rates.

[Hitthelight]

Many thanks for this instructive video 👌
Would it be possible please to have a link for the bloomberg's report mentionned in the video?

[andersstieberth]

@NewMoney you videos are so good and very easy to understand. Keep up the good work!

[Unbiased]

The demand for low priced apartments is sky high in the same areas where these commercial buildings are located. So if politicians could just get their act together and convert these zones into residential zones the problem would be solved.

[MannyBernabe]

Great content and great editing. Thank you.

[marijalisicyna]

Would be interesting to have video about total real estate market including housing

[schmoofadoop]

You guys should do a story on the spikes in HELOC's because people can't refinance and their homes are overvalued... Bloomberg just put up an article about it... people are borrowing money with variable rates against their homes at 8-9% and just as you guys touched on in this video, those rates are very unlikely to come back down again anytime soon if at all.

"Those who fail to learn from History are doomed to repeat it" and all that lol

[juanfernandez]

best way to take advantage of this is to identify ETF's that are composed of commercial and office real estate. It limits your risk and allows you to have more exposure without having to go all in in a specific REIT.. I did the same thing with KRE during the regional bank BS a few months ago.. great video bud! I appreciate it.

[jmk]

Best part about once you save money by moving your company out of office space, you can’t move back unless it significantly increases productivity. Reason being that you save money, stock price goes up. Lose money pointlessly, stock price goes down

[michaelkonen]

Why do the loans need to be refinanced? Owning a residential property, I would only refinance if I needed access to capital or wanted a lower rate. Seems odd that these owners are forced to refinance. Why doesn’t the loans terms last the entire lengthen required to pay off the property? That’s seems like an issue.

[rightright]

Worth to watch, 3:05 refinance imposible