Although the residential markets may be failing, many analysts believe that the strength of commercial mortgages is holding many banks together in this difficult time. For example, Lehman Brothers, who currently holds more than $31 million in commercial mortgages is actually doing better, as opposed to Bear Stearns, which recently announced that they had to write down more than $2 billion in bad debts.
Their stock has actually gone up, a fact that the company attributes to their full disclosure with investors. The company has been exceedingly honest about its dealings and is managing to weather the economic crisis quite well as a result. Commercial mortgages are still secure, and the company’s earnings were actually over what was forecasted.
Many experts believe that the commercial mortgage market will continue to go up, particularly for loans for rental properties. As more homeowners lose their homes thanks to failing banks, rising interest rates and falling property values, the rental market should be able to stay strong and weather the storm without much adversity. More renters should be flooding into the market and many prospective home buyers are choosing to wait and continue renting until things improve.
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