Wolf Richter: Fed Trips over Eye-Popping Commercial Real Estate Bubble, Accidentally Looks, Sees “Early Signs” of “Search for Yield”

Yves here. The key chart is impressive.

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.

No one in his right mind plays in commercial real estate with their own money. Other people’s money is the key. Low interest rates make it happen. Banks are eager to lend. They repackage some of these loans into highly-rated Commercial Mortgage Backed Securities that yield-desperate investors are eager to gobble up, spreading the risk far and wide.

CMBS made the prior commercial real estate bubble possible, before it all blew up in 2008. And they’re making it possible now. When it doesn’t work out, as in 2008, it isn’t that much of a problem because other people’s capital gets destroyed.

And so prices have been bid up again over the years since the low of May 2009, and miracles have been performed after the crash, and construction cranes are dotting cities, and one of those forests of construction cranes must have triggered something funny in Boston Fed President Eric Rosengren. He opened his eyes and counted these cranes on a short walk in Boston, and for the first time saw what had been ballooning before him for years: a commercial real estate bubble.

Or at least now he admitted it, or a tiny part of it, rolled into a speech on Monday that confirmed, to the apparent shock of the stock market, which swooned, that December “could be the appropriate time for raising rates.”

He then veered into “financial stability considerations” and his crane-count moment:

A qualitative indicator in a major city is a simple crane count. When the number of cranes observed on a short walk in a city such as Boston reaches double digits, as is the case today, it is worth reflecting on the sustainability of such growth.

It has been one heck of a party in commercial real estate. The Green Street Commercial Property Price Index edged up to 120.6 in October, having nearly doubled from its crash-low in May 2009. It’s now 20.6% higher than it had been at the peak of the prior totally crazy bubble that blew up and collapsed with such spectacular financial pyrotechnics:



“Commercial property prices have increased 8% so far this year, and are on pace to equal the 10% appreciation that occurred in 2014,” the report pointed out. And this miracle happens in an economy that has been barely creeping higher:

But it is unclear how long that momentum can be sustained. When compared to yields available in the corporate bond market, today’s cap rates look low. The possibility of a modest decline in prices over the next year should not be ruled out.

Except, as the chart shows, there have been no “modest declines” on an annual basis this entire century. It’s intoxicating boom and terrifying bust.


The commercial real estate bubble and the associated mountain of loans and CMBS have reached such proportions that in September Fitch Ratings began to fret about them out loud.

It found that “the average Fitch loan to value (LTV) in 2007 was 110.7% right on top of the 110.3% thus far in 2015.” It worried about “weakening loan characteristics, declining underwriting quality, and concerns about originator, banker, and rating agency competition.” And it warned: “CMBS cannot afford a repeat of the 2008-2009 experience.”

The Fed, of course, has steadfastly refused to see any bubbles no matter how big and obvious they are until after they blow up and wreak havoc with other people’s money. But Rosengren is suddenly onto something novel, something no one at the Fed had ever thought about: that commercial property prices “have grown quite rapidly, despite the only modest growth in real GDP over the recovery.”

And so he mused about the costs of the Fed’s policies that are responsible for the bubble and the crash that invariably comes afterwards:

One potential cost of maintaining the federal funds rate at the zero lower bound for a long time is that it may incent behavior that would be discouraged in a more normalized interest rate environment. Looking forward, a potential risk of a low-interest rate environment is that investors seeking a higher return may take on too much risk in order to improve returns, perhaps not fully taking into account the higher risk that normally accompanies higher yields.

Early signs of this “search for yield” may be showing up in the commercial real estate market.

Which is hilarious. “Early signs!” See chart above.

Commercial real estate has been going haywire for years, whipped into frenzy by cheap money and yield-desperate investors, all a product of the Fed’s grand designs. So just now, Rosengren sees for the first time the forest of construction cranes and the soaring property prices, and maybe he’s even thinking about the debt that is piled on top of all this, the CMBS, the 110% LTV, and it’s all just the “early signs.” Which makes you wonder how big a bubble has to get before these folks realize it’s a bubble that will blow with the same or even more spectacular financial pyrotechnics as the last one.

Rosengren’s Boston isn’t the only city with forests of construction cranes. My beloved San Francisco has them too. But now the bottom is falling out of luxury real estate. Read… San Francisco’s Luxury Condo Bubble Turns into Condo Glut

Print Friendly, PDF & Email


  1. Carlos

    It’s obviously a bubble on the way up. I’m not going to call it about to burst, these things have have a habit of defying the laws of surface tension.

    I can’t even think how so called regulators let it happen again so soon. It’s beyond incompetence: Greed, vested interest, conflict of interest and a drizzle of corruption.

      1. susan the other

        They got that joke straight from Larry Summers. But Rosengren is now at odds with Obama whose administration is promoting a multi-family housing boom and even advertises in PSAs that the nation needs lots of apartments just to keep up with population expansion, etc. – which is nonsense. Multi-family housing is a boondoggle to keep the economy from cardiac arrest – as real estate has always been. Fracking and low grade oil from tar sands is the same – the government promoted all those junk bonds too. So on the one hand the economy is virtually dead so they can’t justify higher rates while at the same time low rates, promoted by the administration, create an unsustainable real estate market. And as usual nobody is pointing out that Boston, like Manhattan and Long Island, etc. is going to be under water fairly soon. Enough to make it a very undesirable place to live.

  2. ambrit

    It’s not just high end commercial real estate either. As I have written earlier, the rental prices for strip malls and older malls have not abated, even though there is a larger than normal vacancy rate in those properties, (at least here in the Deep South.) One possible factor in this is the practice of ‘out of town’ management of many of these properties. When one bases their pricing on “National” data instead of “local” data, a sort of ‘real estate boosterism’ results.
    Financialization seems to destroy everything it touches; very much like the story of “King Minus.”
    Sesame Street to the rescue:https://www.youtube.com/watch?v=r7PutARhh0c

  3. Ignacio

    It migth be a bubble, it looks like a bubble. However blaming zero rates for that bubble has become a meme without any evidence. Just that “zero rates migth be pushing investors to…” This is pure speculation.

    1. craazyboy

      We’ve never had a bubble in anything, especially real estate, of any kind. Greenspan was clearly focused on Mississippi, Montana and Kansas residential real estate and there were no signs of a bubble up thru 2006. Then Ben kept an eye on things thru 2008 and no bubbles here either.

      Deflation is real, however, and asset prices must be restored to their former Peak Asset Value. This can be accomplished by the Fed thru judicious stewardship of QE and interest rates, tho negative interest rates and more QE may be necessary for sustainability, or better yet, growth in Peak Asset Value.

      But what investors have to do with any of this is not well understood by the Fed or the public. Fortunately, lack of complete understanding of complex economic and financial mechanisms shouldn’t hold policy makers back from using a policy tool that’s empirically proven to work, and the Fed does provide studies extolling the virtue of Fed policies. These are free for the asking too, and the taxpayer has borrowed the money to pay for them!

        1. craazyboy

          Hello, Nike of MI. I made up this handle, craazyboy, but you saw right through it! A couple of sharp eyed old fogies we are, aren’t we??? hehehe. Good news, by the way. The Fed has your state, MI, on bubble watch too. We shall stay diligent!

          Your Civil Servant,
          Janet Greenspan

    2. financial matters

      Yes, money may be cheap but who’s controlling who gets it?

      Why is it being funneled into real estate and stocks when there are so many worthwhile things that could be funded?

      Whose money is it to start with?

    3. Dave


      ZIRP causes speculation for returns, speculation for returns causes misallocation of capitol, misallocation of capitol causes bubbles.

      We have had zero % interest rates for ~8 years now, this is 100% guaranteed to cause distortion. The Fed Res is afraid to move it even by .25%, terrified actually.

      Bubbles everywhere, you could even say the entire economy is a bubble right now.

      The only speculation right now is in trying to predict when the bubble pops.

                1. Ignacio

                  And why there aren’t many investment opps? Because demand is lagging and, you now, governments must be austere.

                  1. MyLessThanPrimeBeef

                    Demand is not lagging (in reality, no money to meet demands) and the governments can stay austere, if you deliver money to where it’s needed – the people.

                    Give the people new money and their demands (for surviving the coming winter) can be met.

                  2. washunate

                    That’s where we get into really interesting territory. The USFG doesn’t practice austerity.

                    Lagging aggregate demand is an unfortunate but necessary consequence of the looting that is required* to entrench inequality. The very activities of predation themselves involve consumption of resources without corresponding productivity. Hence, it is impossible for ZIRP not to result in the lagging demand that people are so worried about. To blame austerity is to miss the actual chain of events.

                    *Of course, if the people would just voluntarily be subservient to their well-educated and deserving overlords, this wouldn’t be required and thus the resources of social control could be spent more productively. But alas, the unwashed masses refuse to accept their proper place in society.

        1. Beans

          Excess savings is all of the money locked up in 401k’s, 403b’s and other retirement plans that people cannot touch until retirement without a penalty. They can’t use the money to pay off mortgages, start businesses, pay for school or anything else useful in the short term – it is all locked up and out of their grasp until they are of retirement age – which is likely when they sell their house to down size, celebrate college graduations that are already paid for and retire from businesses that they then sell. Saving for retirement encourages present day debt.
          Those “stewards” who control the country’s retirement income are the ones with the excess savings – see CalPERs, not individuals.
          If anyone making policy gave a rip about bubbles, they would address the problem of Wall Street total control of individual’s retirement savings. Give the control of the money back to the people who are doing the saving and help them figure out what to invest in.

          1. NotoriousJ

            Nonsense, it isn’t the pee-ons 401Ks.

            The excess savings is directly tied to wealth inequality. The *accumulation* of the bulk of the world’s wealth in the hands of a relatively small number of households who have nothing to do with that money other than invest it. This is dead money to the real economy, and a greater and greater proportion of money supply becomes trapped in these dead money pools as time goes on.

            This is in fact the argument that conservatives should be making against income inequality – that it creates a bubble-prone environment, and encumbers real growth.

      1. financial matters

        I wonder if this worry about a slight rise in interest rates has more to do with worry about derivative side effects such as with interest rate swaps.

        Similar to how what should have been a normal 10% correction in housing prices led to the financial crisis.

        1. blert

          Four Big Banks constitute the entire market for CDS and Interest Rate Swaps.

          The typical contract term is 60 months.

          A rise in interest rates would have these four institutions on the hook for monster money.

          They would implode, of course.

          I expect the Federal government to intercede and let them reneg on all their contracts.

          This will save them — by moving the pain to everybody else.

          1. financial matters

            I suspect this is also the reason they set up the reverse repo program with the money markets, to help support what could be a very complicated renegging process.

      2. Procopius

        Pfui! Is no such thing as “misallocation of capital.” Is delusion of Austrian and Chicago economists. Is only, “People got no jobs, people got no money.”

  4. MikeNY

    They never see bubbles ex ante because they are dogmatic bubble agnostics. Which is to say: ideologues.

    In SF, the current joke is that you see more cranes than pigeons.

    1. Whine Country

      I think their position is that you can never prove that we’re not in a bubble until it has popped. So if you can’t prove that something is false, why waste the effort. Makes sense to me.

      1. MikeNY

        One of their mandates is to ensure financial stability (e.g., the SF Fed states this explicitly). Blowing serial asset bubbles is NOT ensuring financial stability. Plenty of people, from Stephen Roach to Nouriel Roubini to Jim Grant to Paul Singer to Jeremy Grantham and Bill Gross have criticized the Fed on this for years. Even Larry Summers has mused on their bubble-blowing propensity, for God’s sake.

        They choose not to hear it.

        That does NOT make sense to me.

        1. Procopius

          One of their mandates is to ensure financial stability …

          That’s actually not one of their mandates. That’s a goal they invented themselves because (a) they’re all rich and (b) all their friends are rich.

        2. economicminor

          I think it is much more complicated than the FED not seeing the bubbles. With the way debt is structured, much of it is based upon some asset value. You borrow against something, not just your good looks. Well, not since NINJA loans anyway. As the asset values go up, the ability and amount a business can also borrow goes up. There are many loans that can be called if the asset value disappears or is grossly impaired.

          I think much of this country is in a pickle hoping the short stop will somehow drop the ball… or over throw to the third baseman. When all the short stop has to do is walk slowly towards the runner and tag him. If/when interest rates go up by very much, many assets will drop in value and thus cause a call on many loans.

          What the FED hoped for when they started lowering the rates was for two things mainly. One was that Congress would address the over spending and corruption issues and two that the American worker would go back to work and buy more and more things. The FED couldn’t give the money to the workers, only Congress could do that. All the FED could do was make the money available to the banks. The banks lend to those with assets and income. That wasn’t the American worker so we ended up in these serial bubbles.

          If you want to blame some institution, at least focus on the who created the problems and then never fixed them. Lack of regulatory power and incentives to cheat and inappropriate tax laws and spending on wars while lowering the taxes on the wealthiest was not and a good approach to what was facing the US. Congress as far back as I can see has not done an appropriate job in managing the US and left the FED with little choice but to do what it took to keep its member banks from crashing along with the US economy..

    2. MyLessThanPrimeBeef

      I see not just bubbles, but wars on the asset-less (and asset-light) and those (refusing to join the orgies) with cash.

          1. economicminor

            why only the Democratic Party’s issues? Seems to me there is plenty of blame of inappropriate legislative policy and actions by both parties.. Or as I see it, the one party with two factions. Well, the Republicans have split in two so now there are three factions of the Oligarch party.

        1. different clue

          Isn’t it also an effort to torture those with “cash” savings of various kinds to spend their “cash” on raising the price of stock shares and other “buy to resell” instruments? Meaning also a war on the cash not-yet-poor?

          1. MikeNY

            Yes, I think you’re right. It’s really a war on everyone without large equity portfolios. In other words, it’s a war on behalf of the capitalists against everyone else.

            “Trickle-down” is I think the code name.

  5. James Levy

    Can anyone help me with something: when did private sector borrowing to meet immediate cash needs become the norm? The classical model of Capitalism we were all fed clearly showed firms making profits then plowing (oh that term, plowing) the profits back into investment and expansion. Today, it seems that most firms could never manage for four months on their own cash flow without resorting to borrowing. And then the Republicans turn around and insist that the government be run like a business–Earth to Republicans, it is run like a modern business!

    It seems to me that all these bubbles would be much harder to initiate and to expand if firms were limited to borrowing a certain percentage of their net worth. If businesses were forced to act the way businesses are supposed to operate (and the way they propagandize themselves as operating in contradistinction to evil government that borrows too much) we’d be in a lot better shape.

    1. blert

      Operating businesses SHUN real estate.

      For gazillion (tax) reasons, it’s better to rent space.

      The obvious exceptions being sole purpose properties that simply have to be held by a big corporation. ( Apple HQ, steel mills, and such )

      Boston is booming because one of its biggest money machines IS the trust fund.

      New York City = the market

      Boston = the vault

      State Street Bank holds astounding assets — and they just keep growing.

      It’s a custodial bank… an electronic vault … with no small amount of paper shuffling, too.

      1. cnchal

        Boston = the vault

        Reminds me of the Chinese and their empty concrete shells as wealth storage vaults.

    2. economicminor

      Back to the debt issue.. If their debt is based upon the asset value of their stock or it represents the value of the company, then when revenues fall and the possibility of their share price falling, the prudent thing to do is borrow against the current value to keep the price propped up.. and when everybody is in the same boat, so to speak, then the market goes up even when revenues go down.. and the amount everyone can borrow also goes up and thus a crazy market that is bound to cost cutting and borrowing to keep its share prices up.

      Cost cutting means that the value of labor is diminished as that is the main way to control costs. Lower labor costs means more robots. Lower labor costs then hurt the over all picture as there are fewer purchasers of the products made. Add off shoring and the picture becomes clearer. A continued reduction in the Velocity of the Money in our system.. https://research.stlouisfed.org/fred2/series/M2V

      Share buy back also benefits those at the top who have stock options fixed at some lower rate.. So a self perpetuating rise in stock prices.. Which also contributes to the wealth inequity.

      Until something happens and then there is nothing below.. As assets (stock prices, inventory, value of infrastructure, property) decline, many loans will be called and the ability to refinance will disappear. Those swimming naked will be exposed but that won’t be the end, all businesses in the US will shrink as the velocity of money will shrink even faster than it already is..

      The lack of money moving thru the economy is actually the sign of what has been happening and shows that the economy has been in contraction for a long time.. Since the Great Recession bagan at least.. The fact that the FED was trying to stop the inevitable contraction and the borrowing to buy back shares has kept it from happening does not mean it won’t.

      One day we will awaken to some catastrophe of some kind and the market will swoon hard and not recover and the FED will have very little leverage to stop it. All they can do is QE. QE fast and hard and long. But IMO it is most likely impossible to be everywhere at once and it I’m not convinced that even Congress could do anything once the next phase starts.. But if it does, then there will be another one down the road that will be even bigger as debt based upon asset values that are based upon ever increasing debt is not a sound economic policy and will lead to a catastrophe in of itself..

      Back to Chris Martenson’s you can’t have exponential growth in a finite system.. There are limits to world wide growth. Energy limits, resource limits, pollution limits, limits on clean air and water.. And ever increasing debt requires ever increasing growth.. Have we reached our limits? Don’t know but we are closer than we were when I was born almost 70 years ago.

  6. Larry

    Nice that it only took Rosengren noticed the commercial real estate bubble in Boston only as he stared at cranes dotting the Seaport and financial districts. One would expect that he has better access to data than the average Joe getting off a commuter rail train in the city. Or that he’s capable of reading the Boston Globe, which did a lengthy piece on soaring commercial property values in the city months ago.

    1. tim s

      Good point. Given that, one might wonder whether he is truly interested in the responsibilities of his position.

      But, then perhaps that is just a quaint belief of mine that he would perceive his responsibilities to be as I would.

    2. economicminor

      Other than noticing, what exactly is he to do about it? .. And remember that his position/income/lifestyle is based upon the way things are.

  7. craazyman

    It might be an asteroid or it might be a bird. They look the same depending on how far away they are.


    It could be a flying rock with wings and a beak.
    It could be somebody’s ham sandwich hurtling through the air. That would look like an asteroid too if it was 17 feet high and between you and the sky. Think about that. (It would have to be wrapped in clear plastic otherwise the bread and ham would fly off in 3 different directions.)

      1. Carlos

        That was just a friendly comment, with either a hanging high five or implied mild insult, depending on your POV.

          1. skippy

            Crasszyman… is a lost “individual”…

            Skippy… highly intelligent but from a childish perspective… loved his car lost to the flood but, wonders why on the train or bus observing how sheeple do it with a smile….

            1. craazyman

              can you believe that was three years ago? holy smokes. three years of peanut gallery nonsense and doom & gloom asteroid posts. It’s like watching pant dry and still no 10 bagger!

              However, I do think the Big One is coming. Team Asteroid will be redeemed, but when to put the short positions on? That’s when you finally have to get lucky

            1. skippy

              Sharper looking at what….. through what optics… a wall… fueled by Xanax and cheep booze – ????????

              1. ambrit

                I’ll give him this; Zanies and Plonk give one better information than the MSMs. Something like the “Drunken Master.”

  8. Dan Cullen

    While I don’t have near the education, status, or take home pay of a Federal Reserve officer this piece reminds me of 2006 when I saw 13 crane towers in the South Loop area of Chicago and wondered “how can this go on?”. Maybe I should have gone and got that Harvard MBA….

    1. susan the other

      Everybody was looking at real estate back then and saying it was a house of cards. But it didn’t just happen in the early 2000s. It started under Reagan and accelerated to 2008 without any balancing out. The system has only one gear: forward. In order to maintain momentum we offshored entire industries; pushed development all over the world on our dollar; allowed banksters to financialize and illegally insure their securities; and gave enormous amounts of welfare to international corporations. And we trashed the planet. Now we call these lovely achievements “assets” and like the dollar, we will not let them deflate. Why can’t we just admit we are working within a system that no longer works; if it ever did. We can’t see the trees for the forest.

      1. blert

        If you think real estate wasn’t booming during the Carter years…

        Then you need a way-back machine.

        Volker only stopped that bubble late in Carter’s presidency.

        And before that, we had insane bubbles down in Florida — the REIT fiasco.

        And the insane bubbles in the oil patch. (real estate)

        These all occurred in the 70’s.

          1. jrs

            Yes it’s why it’s cursed with things like Prop 13. Real estate bubbles -> increased taxes on real estate that has gotten crazy bubbly -> backlash justified and not.

            Maybe in a saner society a house would be a thing to live in …

            1. skippy

              The modern case of the Chicago school supplying propaganda for the land developer – owner lobby acerbated by RE inflation replacing wages which should have been tracking the expansion of the M supply…

              Skippy…. its all so Temple Grandin….

  9. Synoia

    Cranes as far as the eye can see….

    In Greater Vancouver, all over the place, building Condos and Apartments,

    and in London, take a walk along the Regent’s Canal from the Zoo Eastward.

    Funnily enough here in the OC (Orange County California), not so much. Only Broadcom about to be ruined by MBAitis.

  10. Paul Tioxon

    Hoagie City is no more. The frozen in time sign on a blighted block of Market St West, in the central business district of Philadelphia was being demolished when an unbraced brick wall crashed down on the adjacent Salvation Army Thrift store, murdering 6, injuring more, including a woman glad to be alive, even if she lost both of her legs. But such is the cost of progress in a hot downtown commercial real estate market. The assembling of a block long parcel of ground to build some sort of gateway skyscraper or another was the brass ring beyond the grasp of the expat NYC Porno-King of Times Square. The slum/porn land lord was not charged or tried, his Ivy League architect, a University of Pennsylvania trained grad was granted immunity in exchange for testimony that convicted the 2 African-American contracted to demo the site.

    Fortunately for the city, a local developer that is bullish on the city, one of the main players in the massive, at least for this city, commercial construction boom, bought out the porn/slum lord. Plans will take some time to absorb all of the other under construction and recently completed high rise projects. Included in the boom are ultra-lux high rise apartments/condos, selling for the first time for $Millions per unit. Hotels with high end operators such as W and SLS, which destroyed the cultural landmark, Philadelphia International Records HQ and recording studio, where the Sound of Philadelphia used to be, smooth R&B was replaced by dump trucks and jack hammers. Office buildings as well, retail makeovers of entire blocks, which will have electric vehicle charging stations in their parking lots, next to the bike racks! Hospitals buildings going up by the $Billions from West to North of the central business district. Student dorm high rises that look more like offices. The cranes in the sky made the skyline unfamiliar to me, used to seeing the dominance of the red glow of PSFS. The city is almost unrecognizable. Population shrink has been turned around and growth, mostly in the center of the city has taken place fueled by one new apartment or condo high rise after another.

    No doubt, cheap money is to blame for some of this, but there is REAL demand, as seen by low rental vacancies. As David Harvey in “PARIS, CAPITAL OF MODERNITY” writes about the remaking of Paris by Haussmann, the need to recast the city in the form and style commensurate with the new wealth of the rising bourgeoisie class was necessary because the old Paris, with its nasty twisting and turning cobblestone streets, narrow as could be from an earlier pre-capitalist state of wealth did allow for the consumption on the new scale of wealth being ushered in by industrialization. The shopping palaces and wide boulevards with epic monuments and public art adornments created the city in the image of the people whose success was triumph measured in money.

    A similar transformation of Philadelphia under the aegis of the post WWII reform movement and the city planning commission lead by urban planner Ed Bacon, saw a move from smokestack industrialization to the emerging service economy. But massive infusions of capital were needed to tear down filthy warehouses, train tracks and other left over 19th century structures that would hold back the image of a skyscraper filled future. And even more damaging to the downtown development of tall skyscrapers was the absolute refusal to build any structure in the city taller than City Hall, as we used to say, nothing as tall as Billy Penn’s Hat. Seriously, the local wealthy, and there were plenty of them, had a gentlemen’s agreement not build any structures taller than that. So, surplus profits seeking big structures in the sky by passed Philly, until the 1980’s, when the first of a twin towered Liberty Place went up and broke the height barrier. Once that happened, the necessary and sufficient conditions for the absorption of capital was in place for the city to join in with former also ran urban centers from the South and Southwest in constructing a skyline. Philadelphia now has the sky as the limit and can easily attract capital that needs massive construction projects in order to circulate and grow. Up until the gentlemen’s agreement was retired, it was just not a city to build the tallest of the tall and was by passed by much needed investment capital.

    The current Neo-Liberal Gilded Age is producing many new growth cities, with completely new physical appearances than they had when they said good bye to the 20th Century. With so much money, and so many would be local development boosters all over the nation, construction with cranes in the sky is almost a given to turn the capital into a commodity, commercial real estate for resale (M-C-M’), but if only large enough for the cash horde in the $Trillions to circulate. The taller, the bigger, the better. Make no small plans, small plans produce small profits!

    1. polecat

      All of this commercial phallic highrise nonsense is gonna cease once energy constraints start to kick in.

      1. blert

        I might surprise you to know that those modern structures are far more energy efficient than anything prior.

        You might Google BAS. (Building Automation System)

        1. polecat

          Energy efficiency ceases to mean much if there is little to no ENERGY to operate the building infrastructure.

            1. ambrit

              If a crash of that magnitude happened, the “workers” would have more important things to worry about than showing up at the office.

  11. polecat

    Just imagine having to walk up multiple flights of stairs due to intermittent or complete loss of power to run an elevator, let alone lighting , plumbing, etc……….Hey, maybe our new*age lairds can hire all us unemployed serfs to convey them to their candle lit offices on litters, just like the elite of old Rome!

  12. Enquiring Mind

    There has been too much theoretical discussion about bubbles.

    Like that sheltered Bostonian, you would be better served by talking with borrowers to learn about them and their views on the supply of and demand for money. Here are a few that I have gleaned over the past few cycles.

    “We are developers. If you will lend us money, we are going to build. The projects may not succeed, but we build because that is what we do.”

    “Banks offer non-recourse financing and low rates because they see other banks doing that. We are happy to take their money on easy terms.”

    “Our loan growth isn’t keeping pace with plan because the credit department is too tight. They need to relax standards for us to keep up.”

    None of that is very complicated, nor does it need to be. Human nature is often very simple to observe and understand.

    1. Carlos

      “We are a young married couple, desperate for mini Tarquin to develop his full potential in a bijou, 65 sqm, artisan style, walk up apartment near the Reggio Emillia.”

      “If you lend it we will spend it.”

  13. sd

    There’s a bad real estate bubble in Reykjavik right now. Everybody seems to be in total denial about it. Cranes are back. Prices are above 2007. Just saying, Iceland tumbled first….

  14. Boatwright

    Ocwen (Credit Suisse, M Stanley, & Barclays) Financial is back with $1/2 Billion A, AA, AAA of term notes backed by reimbursement rights to interest and principal payments that Ocwen advances to mortgages it services, when homeowners fall behind on their mortgage payments (!!!!!). It refinanced a previous $1.8 billion servicer advance facility.

    More crap bundled as roses being sold as “safe” high yield to little old ladies, pension funds and insurance companies desperate to cover their asses. Life gets risky when you’ve got 6% obligations in a 0% market.

  15. Sarah from TX

    A qualitative indicator in a major city is a simple crane count. When the number of cranes observed on a short walk in a city such as Boston reaches double digits, as is the case today, it is worth reflecting on the sustainability of such growth

    A short walk near downtown Austin, Texas would probably give Mr. Rosengren indigestion, then!

  16. BEast

    So is it all unfamiliar acronyms that us non-financiers need to fear, or just the ones ending in “S”?

Comments are closed.