Terrifying prediction by economist Gary Shilling, who knew about the 2008 crisis

Terrifying prediction by economist Gary Shilling, who knew about the 2008 crisis

While the office and commercial real estate sector was disrupted after the pandemic, many economists began to draw attention to the problems in these areas.

“I think the biggest bubble right now is commercial real estate,” Gary Shilling, the economist best known for correctly predicting the 2008 mortgage crisis, said last week on The Julia La Roche Show investment podcast.

“This is not as big as the mortgage craze, but I think it is a bubble that is starting to burst,” Shilling said, referring to the 2008 defaults that collapsed many Wall Street banks and led to the global financial crisis.

Shilling, known as the prophet of the housing market, warned before the crisis that risky lending was the “biggest financial problem” for the American economy and wrote an article titled “The Housing Bubble Will Likely Burst” in January 2006.

Gary Shilling


Shilling finally stated that remote or hybrid work, which has become widespread after the pandemic and has been implemented as a model in many companies, will affect the commercial real estate sector:

“There are office buildings that are now empty and one of the problems is that these office buildings are approaching maturity. “Mortgage lenders either don’t want to renew loans or demand much higher interest rates to do so,” she said.

“There are also other commercial real estate, such as hotels and shopping malls, that have been in trouble for a while,” Shilling said, also stating that stock markets may fall to their lowest level since the pandemic, and predicting that “if We are not in it yet, we will probably enter a recession soon.”


“My view is that the stock will fall 30 to 40 percent from peak to trough,” Shilling said. “If you look at most of the leading indicators that reliably predict recessions, it’s pretty difficult to avoid a recession,” she said.

The data and opinions of experts in the commercial real estate market also confirm this.

Delinquency rates for commercial mortgages, which include offices, apartments and other commercial properties, have increased for four consecutive quarters, according to the Mortgage Bankers Association (MBA). More than 5 percent of office loans and 5 percent of retail loans defaulted in the third quarter.


Erin Sykes, chief economist at residential real estate brokerage firm Nest Seekers International, echoed Shilling’s views on the housing market, saying commercial spaces are struggling to pay rent on time.

“While some properties, such as shopping centers and retail, have been somewhat protected, the office segment has been hit hard,” Allianz Trade economists said in a report published in late October. The report also states: “High interest rates made real estate less attractive compared to risk-free government bonds and caused a significant drop in asset values.”

Stijn Van Nieuwerburgh, professor of real estate and finance at Columbia Business School, author of the Commercial Real Estate Risks report published by Goldman Sachs in October, assessed: “The office market may take a few years to stabilize.”

Source: Sozcu


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