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Steve Chiotakis: We’ve heard a lot of hopeful talk about the recovery of the economy. Problem is, this tunnel, the light at the end of the tunnel, has become longer than expected. Instead of a rebound, some cities are bracing for another wave of foreclosures, this time in the commercial sector. Marketplace’s Jeff Tyler takes us to Seattle.
Jeff Tyler: Regional banks in Washington state made some bad commercial real estate loans. And in some cases, those loans will sink them. Economist Matthew Gardner:
Matthew Gardner: I expect we’ll see a fairly substantial number of those banks not exist by the end of 2010.
As banks fail, many of their bad loans will get sold at a discount. Cindy Thomas is a Seattle real estate lawyer:
Cindy Thomas: Once all that property starts hitting the market, I personally believe that the values are going to drop again.
Falling prices probably sound like a good thing if you’re a renter and a bad thing if you’re an owner. Or, maybe you think problems in commercial real estate don’t touch you at all. But Thomas says the ripple effects reach everyone.
Thomas: You got a retail strip, and it’s half empty. It just brings down all of the property values in the neighborhood.
Seattle has too much vacant office space on the market and too many un-sold condos. Economist Matthew Gardner says that will directly impact the city’s development.
Gardner: This city’s going to be in a bit of a holding pattern, I think. Going forward, I would expect to see no residential, nor commercial new projects start development for quite some time.
A holding pattern is bad news for unemployed construction workers. Gardner says over the last year, construction employment is down 20 percent.
There are lots of signs that the local economy could get worse before it gets better. But at least a few developers are staying optimistic, according Charles Staadecker, who owns a commercial real estate company.
Charles Staadecker: In many cases, people are still going through the permitting stage, because they realize in two or three years, it will be again time to build.
But before that, many more banks could go belly-up, and a lot more real estate may go into foreclosure.
In Seattle, I’m Jeff Tyler for Marketplace.
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