Commercial Foreclosures Are the Next Wave of Default

The foreclosure crisis is born out of downward-trend of US economy. The foreclosure tornado first hit the residential property sector; made millions of American families forfeit their homes to foreclosure process and walk-off from their long-lived residences, all of a sudden.

The chain reactions caused by the down-turn of economy – foreclosure crisis; credit crunch in the banking sector; erosion of confidence in inter-banking activities; withdrawal of foreign investments; bankruptcies of renowned financial institutions including Lehman Brothers; increased unemployment rate; depletion in purchasing power of the people, and the story continues endlessly.

Eventually commercial property sector has been hit inevitably, due to above reasons. Dearth in occupancy of hotel rooms; vacancies of office complexes; lack of customers in shopping malls; thinning out of crowds in entertainment avenues and enjoyable resorts and clubs – all point towards one thing – loss of revenue and therefore inability to meet mortgage commitments ending in default.

Experts in the field predict that commercial property sector is in for the next big default wave. Of all the types of commercial property foreclosures, the front runner looks like the retail sector – connected directly with buying consumers. According to statistics, retail property prices declined 19.3 percent in the first quarter of 2010, in the top-ten Metropolitan Statistical Areas of Philadelphia; Los Angeles; New York; Washington D.C.; Detroit; Houston; Atlanta; Dallas and Boston.

The dip is coming mainly from retail prices. Here again, the chain reactions of not-so-healthy economy play their roles. Consumer prices are lowered by the Retail Industry, so as to meet the demands and attract the varied interests of the unemployed poor.

The large retail chains are put to pressure in offsetting the loss, by cutting costs, with prices dropping all-around. Cutting costs reflect in postponing or totally abandoning expansion. By curtailing expansion, the whole commercial industry suffocates and the commercial real estate sector ultimately suffers.

What is the remedy? We should have job growth first. This will lead to measurable economic growth and unless and until there is economic growth, the commercial property sector is going to continue melting in the heat – experts point out.

Talking of retail prices, it leads to the brand new financial reform bill titled “The Restoring American Financial Stability Act of 2010” from Senator Dodd, which has been scheduled for a vote. A brief intro says this is the Financial Reform Bill that will “super-size our already inflated government and give the government Czar-like control of your personal financial information.”

Among the many proposals under this bill, there is one to create a new agency, the Bureau of Consumer Financial Protection. This agency will have unprecedented power to aggregate data on everyone and every business financial transaction, anywhere in the US country. The new Bureau will be able to monitor and track all consumer purchases and they can share this data with whomever they wish.

Experts say – if this bill is passed, it will give the government even more reasons to take your money for tax-payer paid programs.