Howard Lutnik, CEO of financial services firm Cantor Fitzgerald, this week said he believes the U.S. real estate market will likely see a "generational' in the next two years, including a massive default in loan sales.
In an interview with Fox Business host Maria Bartiromo at the World Economic Forum in Davos, Switzerland, Lutnik warned that the defaults in real estate market loans could amount to $1 trillion by 2025.
"I think $700 billion could default... The lenders are going to have to do things with them. They're going to be selling. It's going to be a generational change in real estate coming, end of 2024 and all of 2025. We will be talking about real estate being just a massive change, $700 billion to $1 trillion in defaults coming," he said.
Lutnik also warned that commercial loans will likely also be "wiped out" over the next year amid high mortgage rates. This, in turn, would also significant;y affect the real estate market's equity rates.
"I think what's going to happen is loan sales, which no one talks about, are going to become a huge business. Because when mortgages on commercial buildings come to a trillion coming due in the next two and a half years at these high rates, you're not going to get proceeds," he added. "Meaning when you have $120 million loan on a building and somebody says, 'I'll give you $90 million at a much higher rate,' you throw the keys back to the lenders... Real estate equity rates are going to be in trouble."
Real Estate Market Predictions
Lutnik's warnings come after the country's real estate market was hit with soaring mortgage rates in 2023, with the number surpassing 8% in October. The national office vacancy rate also jumped to 19.6% last year, marking the highest rate recorded since 1979.
The future of office buildings in the U.S. remains unclear as more companies shift to a hybrid or remote work model. That being said, experts predict that the real estate market will see significant improvements in 2024. This includes an increase in the supply of homes and a competitive housing market, per Norada.
