Commercial is the new residential
Commercial real estate might soon be heading the way of the residential housing market, according to a report out by Moody's. But Janet Babin explains why Moody's isn't ready to panic yet.
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Scott Jagow: We all know how bad the residential housing market is. But this morning, there’s evidence that commercial real estate might be next.
Marketplace’s Janet Babin reports from North Carolina Pubic Radio.
Janet Babin: The Moody’s Investors Service report says commercial property values are down 1.2 percent from August to September. While the figure’s small, the decline follows years of decisive increases for the sector.
Still, Tad Philipp with Moody’s says they’re not hitting the panic button here:
Tad Philipp: The financing crunch is affecting commercial real estate. Like every other sector, it’s going to cause our prices to go down. That will cause delinquencies to go up. All that’s true. The key is the degree, and we believe it will be more of a reversion to normal levels than an alarming level.
Philipp says the historical default rate on commercial properties is about 1 percent.
I’m Janet Babin for Marketplace.