The CEO of a major financial services company has warned of a “very ugly” property market over the next two years.
Cantor Fitzgerald CEO Howard Lutnick speaks with FOX Business host Maria Bartiromo at the World Economic Forum in Davos, Switzerland, and says a “generational change” is on the horizon. and warned of large-scale defaults in loan sales.
“I think $700 billion could be in default…The lenders are going to have to work with them. They're going to sell. There's going to be a generational shift in real estate from the end of 2024 to 2025. We're going to see a generational shift in real estate. Real estate is really going to be a big change, and we're talking about $700 billion to $1 trillion in defaults,” Lutnick emphasized.
He added: “It's going to be a very, very ugly market in which to own real estate over the next 18 months or two years.”
He explained that higher interest rates would result in commercial loans being “wiped out”.
“I think what’s going to happen is that loan sales, which no one is talking about, is going to become a huge business because commercial building mortgages are coming due over the next two and a half years at such high interest rates. Because if you reach a trillion yen due on that loan, you're not making any money. So you have a $120 million loan on a building, and someone says they'll give you $90 million at a higher interest rate. “When you do, you hand the keys back to the lender…Equity interest rates on real estate are going to be difficult,” he said. .
The CEO also gave a frank assessment of the market, warning that people are “too optimistic” about the future of the Fed and rate hikes.
“I think rates will continue to be in a constant vortex. I think all this talk about a 175 basis point cut is too much. Too much. I think [it] It could be 50 basis points, or it could be 75 basis points. But that's it. So I think that's overkill. People are overly optimistic about interest rates. I think I'm going to stay around here. But it's okay. The world is ready for stability,” Lutnick said.
