USA: the credit crunch on mortgages begins. Financial crisis coming?
US banks, especially the small ones, are carrying out a silent credit crunch which could soon pose serious problems, such as to bring to mind the times of New Century Financial, Bear Sterns and Lehman. The largest decline among small bank loans over the past week was in home loans, which fell by $18.7 billion, continuing a decline of $19.2 billion the previous week. Combining the two weeks, we note a $37.8 billion drop in home lending in the second half of March. The biggest drop since 2007. The reversal in the Zerohedge chart looks small, but be warned, it's only a possible start.
Bloomberg wrote over the weekend that “nearly $1.5 trillion of US commercial housing debt needs to be repaid by the end of 2025. The big question borrowers are asking is: who will lend them? “. Because the decline becomes all the more dangerous the greater the volume of loans that will have to be renewed in the future.
Bloomberg cites a recent note from Morgan Stanley titled “Scaling Maturity Walls” in which the bank's credit strategists write that “ refinancing risks are front and center ” for homeowners, from office buildings to retail and warehouses , adding that “ the wall of deadlines here is loaded in advance. As well as the associated risks “ .
Looking at the charts below, James Egan of Morgan Stanley writes that “ approximately $400-450 billion of CRE (Commercial Real Estate) loans are expected to mature in 2023. This is a figure equal to that of 2022, and both years are the largest ever recorded (“Exhibit 12”) . From there on it will not be easier, as the maturities will increase every year until 2027, exceeding 550 billion dollars . And “while the maturity walls of other asset classes may not be much anticipated, the commercial real estate problem is happening right now .”
In the meantime, not only has lenders' risk aversion increased, which would be obvious, but there is also a resource problem: small banks are the ones that have seen the biggest cut in deposits since bankruptcy of SVB and Signature Bank, but the small banks were precisely the ones most engaged in real estate and CRE.
Without major lenders, who will refinance commercial real estate loans? Who will run to the rescue for CRE mortgages, related collateralized bonds and derivatives? I guess we'll have the answer soon, and we might not like it.
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The US article: the credit crunch on mortgages begins. Financial crisis coming? comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/usa-inizia-la-stretta-creditizia-sui-mutui-crisi-finanziaria-in-arrivo/ on Mon, 10 Apr 2023 14:23:44 +0000.