Consider the following chart. It shows the value of commercial property under foreclosure:
What conclusion do you draw from the right edge of the chart, which shows foreclosures going up? Here's what the Wall Street Journal says:
Surge in Commercial-Property Foreclosures Suggests Bottom Is Near
In previous downturns, comparable surges in foreclosure activity has signaled the approach of a market bottom. Once lenders seize a property, they are typically quick to sell it, a process that helps determine values of properties after long periods of sluggishness in the sales market.
Does this make any sense at all? What goes up must come down, so foreclosures must be close to going down.
Remarkably, the author doesn't even try to provide evidence for this. And as usual, the Journal's original chart isn't adjusted for inflation, which makes the current surge look sharper than it really is. When you adjust for inflation it looks a lot less like it's reached a peak.
The longer I read the financial press the more I wonder what they're thinking. The actual evidence in this case suggests that foreclosures are going to increase for a while. The Journal itself reported a few months ago that delinquencies would rise at least through 2025 and probably longer. In fact, it was reported by the exact same person who wrote today's story. And office vacancy rates are currently higher than they were during the Great Recession, which suggests foreclosures probably have a fair ways to go.
In any case, no one knows for sure. But it beats me how someone can just declare that the bottom is near based on essentially nothing. Sometimes it's just vibes all the way down.
the wsj exists to influence dumb money and conservative voters
but i repeat myself
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Is that what's implied? I thought the implication was that, after a prolonged period of non-performing loans, foreclosures would surge and with those losses absorbed, markets would return to market-competitive rates.
The longer I read the financial press the more I wonder what they're thinking.
I would say that's true for the political press also. And for some other (but not all) branches.
And I think the answer is, "what do our audience want to see/hear/read so we can keep their eyeballs/clicks/ratings views and thereby maximize our corporate ad revenues and personal brands?"
I do NOT think the answer is, "what is the most informative, most factual and best contextualized explanation we can provide about a set of observations we have made?" (That's the sort of thing those egghead scientists do. ????)
even researchers have problems with commercial influence
Stanford’s top disinformation research group collapses under pressure
Oh yes (and having been there, I'm well aware of the particular susceptibility of Stanford to such pressures), but in this case it was an outside attack, not a conflict of interest (or an outright dereliction of duty).
Not what, if …
You beat me to it. My first thought was, "...I wonder what they're thinking" ? You're assuming facts not in evidence.
KD
Dont think about the office "crisis". There's not enough workers to staff those offices. Thats not a crisis its a slow motion train wreck
https://www.bls.gov/opub/mlr/2015/article/labor-force-projections-to-2024.htm
There are various charts and graphs but the overall thrust is this. Going forward there will be far fewer people entering the work force than LEAVING the work force.
Immigration will not make up for that. It is a very real possibility that America's population growth will stop completely then reverse - like Japan's has.
This will have a profound affect on the United States, and other countries
I think what they are saying is that the bottom is not met as long as the foreclosures are limited to the low cost properties.
But when the higher-end properties are also being foreclosed upon, it means that even they are unable to command pricing power to keep the lights on.
Bad news but it is bad news that seems to indicate there is light at the end of the tunnel.
This goes along with what McDonalds and others are saying. When customer volume went down THEY raised prices to keep revenues up. COVID exacerbated the problem but "hid" the greed. Now that COVID is over the greed is glaringly obvious
McDonalds offering the $5 dollar value meal will help drive customers back into their stores but I still don't think they will be selling as many $18 combo meals. People are getting fed up with higher costs at times of lowered inflation and the last thing the companies want is a wide spread feeling that THEIR greed is causing ordinary Americans to cut back. Coca Cola and Pepsi Cola have said the same thing as McDonalds. They NEED to tamp down expectations for earnings in order to keep Mom and Pop buying their products.
McDonalds earning call today showed disappointing results. Q2-2024 was same income as Q2-2023 even though it was up over Q1-2024 and same-store sales were down 1%.
First time since the start of the pandemic that foot traffic in the US had dropped.
I work in a typical suburban office building. My company and two others are the only tenants left of about a dozen. The owner surrendered the building to the bank in lieu of foreclosure a couple of weeks ago. This is going to accelerate in commercial real estate as leases lapse and the tenants don’t renew. It’s a slow moving train wreck, and the WSJ is delusional.
"In previous downturns, comparable surges in foreclosure activity has signaled the approach of a market bottom. Once lenders seize a property, they are typically quick to sell it, a process that helps determine values of properties after long periods of sluggishness in the sales market."
Yes, I think it makes sense. Note that surges in foreclosure activity signals the APPROACH of a market bottom: leveraged owners try and fail to sell at what they think is a good price until they are foreclosed upon; the lenders seize the property and immediately sell it at whatever price they can get; once the wave of foreclosures has been processed this way, normal market activity resumes and prices start climbing from where they had bottomed.
It's that LAST sentence that's the problem.
"Oh, once tulip-bulb prices have bottomed, they'll start climbing again."
Ok, commercial R/E ain't tulip bulbs, but there has to be DEMAND for prices to climb. The current decline may have started with COVID, but that's far enough in the past now that we can't really ascribe much more than some lingering after-effects to it. The simple fact is, the nature of "office work" changed, and it ain't coming all the way back (efforts of control-freak managers notwithstanding), so nor is the commercial R/E market.
I dunno exactly what's gonna happen. Some buildings are suitable for conversion to housing, but certainly not all by any means! I would expect a LARGE number of "marginal" commercial-space owners are going to find themselves in a no-win situation. And I dunno what happens when they give up, and then their lien-holders give up, and ... tax agencies end up owning the property?
Kevin Kevin Kevin, it's the Wall Street Journal, you know better by now ha ha
I thought it was supposed to be China with the real estate crisis…
Don't worry, they have their problems. I vaguely remember a report saying there was enough housing under contract in China to house their entire population. Not sure how accurate that was, but they do have "ghost cities", and their population is dropping.
Private equity was all in on getting a hold of a company (or hospital), sell the land out from under it, then charge rent at unsustainable levels.
WeWork finally failed last year, and I'd guess that's still weighing on the market. It disrupted things, but not in a good way.
Downtown stores, those that remain in the major cities that still have somewhat viable downtowns are giving way to warehouses along interstates. "Flagship" stores are more like ghost stores--empty sections, very limited selections in open ones, and finding someone to help you or to make a purchase can take forever. Very sad.
WSJ is a Murdoick owned paper, Truth is whatever they think it is at the time. Not a repeatable reality.
The WSJ editorial page is best thought of as the output of the Politburo of a particular not-quite-cartel.
The economic interests of a confederation of capital want the little people to think certain things, and editorial page is the organ provides the official Rightthink.