The American real estate market will be "very ugly" next year, warns Howard Lutnick
The CEO of a leading financial services company warns of a "very ugly" real estate market in the next two years.
Speaking to FOX Business host Maria Bartiromo at the World Economic Forum in Davos, Switzerland, Cantor Fitzgerald CEO Howard Lutnick said a "generational" transition is on the horizon and warned of a massive default in loan sales.
"I think $700 billion could default... lenders will have to do things with them. They are going to sell. It's going to be a generational change in real estate by the end of 2024 and all of 2025. We're talking about real estate being just a huge change, $700 billion to trillion defaults coming," Lutnik emphasized.
"I think it's going to be a very, very ugly market in real estate ownership over, you know, the next 18 months, two years," he added.
He explained that high rates would cause commercial loans to be "wiped out".
"I think what is going to happen is the sale of loans, which no one talks about, is going to become a huge business. Because when mortgages on commercial buildings reach trillions coming due in the next two and a half years at these high rates, you're not going to get profits. I mean, when you have a $120 million loan on a building and someone says, 'I'll give you $90 million at a much higher rate,' you're throwing the keys back to the lenders... Home equity rates are going to be in trouble," he said.
The CEO also revealed his honest assessment of the markets, warning that people are "too optimistic" about the Federal Reserve and the future of interest rate hikes.
"I think the interest rate will remain quite stable. I think all this talk of a 175 basis point cut, that's just too much. too much. I think it could be 50 basis points, maybe 75. But that's it. So I just think it's overkill. People are too optimistic about the rates. I think we'll stay here. but it's OK. The world is ready for stability," Lutnik said.
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