Don Peebles, founder and CEO of Peebles Corporation, and Larry McDonald, founder of The Bear Traps Report, analyze market trends and the current state of real estate.
A New York Times bestselling author and real estate entrepreneur has begun repeating similar warning signs amid “massive” problems within the commercial sector.
“This is a slow-moving train wreck,” Bear Trap Report founder Larry McDonald said on “Morning with Maria” on Tuesday. “This is why the Fed is such a beast in the market. With nearly $2 trillion in maturities in the commercial real estate space, the Fed has a stranglehold on it. And with high-yield leveraged loans and investments Looking at eligibility, “the U.S. corporate bond market will have an additional $1.9 trillion in bonds. So the Fed will be forced to cut rates significantly this year.”
Don Peebles, founder and CEO of Peebles Corporation, added during the panel discussion that “these buildings cannot service their debts.” “Their value is a fraction of the original value when these loans were made. And because there is no resolution in many of these cases, there will be large-scale defaults. ”
Their comments come as Cantor Fitzgerald CEO Howard Lutnick said last week that a “generational change” is on the horizon and paints a “very ugly” picture for the U.S. real estate market in 2024. It's surprisingly similar to what I warned you about.
Paying rent remains a problem for 24% of renters
“I think $700 billion could be in default…The lenders are going to have to work with them. They will sell. There will be a generational change in real estate from the end of 2024 to 2025. We will.' Real estate is just a big change and we're talking about $700 billion to $1 trillion in debt defaults,” Lutnick stressed to Maria Bartiromo at the World Economic Forum in Davos. .
Larry McDonald and Don Peebles discussed commercial real estate on Tuesday's “Morning with Maria” panel. (Fox News)
Peebles explained that there are “two factors” that raise concerns about default. “One is that the contract vacancy rates in these buildings have increased significantly, up to about 20% in places like New York City, for example. And the remaining factor is 80%, or half. is occupied. That's because dramatic changes are occurring in how and where people work. ”
Mr. MacDonald agreed with Mr. Peebles' analysis, and both argued that “the only way” to improve the situation and slow a default is “aggressive interest rate cuts” by the Federal Reserve.
Cantor Fitzgerald Chairman and CEO Howard Lutnick reveals his economic strategy regarding inflation and reflects on the U.S. real estate market.
“What happened was a one-two punch. COVID-19 changed the way people worked. The fundamentals were adverse in New York, Washington, D.C., Chicago, etc. And interest rates rose rapidly, so the exit There wasn't,” Peebles pointed out. “I think lower interest rates will save some buildings. It will save some property owners, but it won't save the majority.”
CLICK HERE TO GET FOX BUSINESS ON THE GO
Jason Oppenheim, president of The Oppenheim Group and star of Selling Sunset and Selling the OC, says California mansion tax has delayed development and filming of next season. He told FOX News Digital about this.
“I totally agree,” MacDonald chimed in. “Sometime in March, April, May, I think the likelihood of a soft landing in the eyes of Wall Street will drop dramatically. And that beast is in the market because of this new credit risk. , all of which will mature within the next two years, ultimately triggering a significant rate cut mid-year.”
“And remember, this is the most progressive Fed we've ever seen,” McDonald continued. “The Fed is very left-leaning. So they're going to try to help the current White House. They're going to do everything they can.”
FOX Business' Kayla Bailey contributed to this report.
