Elon Musk warns that house prices are expected to fall - and says that commercial real estate is in meltdown

Elon Musk warns that house prices are expected to fall - and says that commercial real estate is in meltdown

"Commercial real estate is dissolving fast. The values ​​of the houses next in line," tweeted the billionaire.

Investors are worried about real estate in a time of higher interest rates and tighter loans.

Elon Musk is again making statements about the US real estate sector.

"Commercial real estate is dissolving fast. Home values ​​next in line,” the head of Tesla and SpaceX tweeted on Monday.

The tech billionaire made the comment in response to a tweet by Craft Ventures founder David Sachs, who noted that a large chunk of commercial real estate debt is due soon.

Musk previously warned that cracks could appear in the property markets following turmoil in the banking sector. For example, the clean energy pioneer said commercial real estate was "the most serious looming issue yet," and warned regional banks could experience a wave of defaults due to their huge exposure to the sector.

The debt-fueled industry has kept investors on guard in recent months as it faces plenty of headwinds. These include higher interest rates, stricter credit terms and work-from-home trends.

JP Morgan estimated that approximately $450 billion in commercial real estate loans due this year may default. Meanwhile, Morgan Stanley Wealth Management said commercial property prices could fall 40% from their peak given the sector's woes.

The American housing market is also facing similar problems, which probably explains Musk's view that prices are expected to fall. According to Morgan Stanley, home sales have bottomed out as higher borrowing costs cripple demand, with experts warning of a possible 15% to 20% drop in prices.

In response to historic inflation, the Federal Reserve has raised interest rates from near zero to over 5% since last spring. While the pace of price increases has slowed, the painful combination of higher borrowing costs and steeper prices threatens to weigh on demand and economic growth.

Moreover, lenders are backing off for more bank runs after a wave of deposit withdrawals brought down Silicon Valley Bank and Cincher in March. These forces exert downward pressure on property prices, and raise concerns that the prices of houses and commercial areas may be affected.