An article for the New York Post discusses how $1,000,000,000,000 of commercial real estate loans are coming due between 2010 and 2013. Commercial real estate developers and owners don’t get long term fixed loans like residential borrowers. They use shorter term, balloon loans to finance their deals. But, this is going to prove problematic in the coming years as the article explains.
I think this also shows that 2010 will be a difficult year for banks. Along with the commercial real estate mess, we have a massive amount of residential properties with adjusting ARMs as I profiled in this post. For anyone that thinks the credit mess is over, I think they are in for a rude awakening.
So what does someone who swims upstream to wealth do? One, keep your debt to income level as low as possible. You need to make sure your debt is very manageable. Second, avoid adjustable debt. With fixed rates so low due to the Fed’s purchases of mortgage backed securities, you should have a fixed loan. Third, avoid betting on the banks. I know so many people that are moving in and out of financial stocks. You are better off going to Vegas than betting on financials. I own the financials through broad market based ETFs, but I wouldn’t invest in this sector for some time. There is just too much risk.