Experts Forecast 15 To 20 Percent Drop In Real Estate Values In The U.S. From 2007 Levels

January 5, 2009 6:55 a.m. EST

Washington, D.C. (AHN) - If 2008 was a bad year for the real estate market in the U.S. marked by plummeting home values and record-high foreclosures, 2009 is expected to be the worst year for commercial real estate, according to the Urban Land Institute.

While the problem centered on the residential sector last year with many homeowners failing to meet their mortgage payments, the economic slowdown is expected to result in more office space vacancies and less rental income. In turn, this will affect the business owners' ability to refinance their commercial mortgages this year.

The situation is expected to worsen for businesses because of the tight credit market, which will affect even entrepreneurs who are up-to-date on their payments, which may lead to rising loan defaults.

Because of the prospects over rising defaults among commercial real estate loans, Real Estate Roundtable chief executive Jeffrey DeBoer called on government to help the industry. Stock analysts warned commercial real estate loans will likely be the next headache of bankers and other lenders.

Bill Goade, chief executive of real estate adviser CreasePartners, predicts the effect of the economic recession will be felt in every real estate market in the U.S. which will result in vacancy rates from 2 to 5 percent in the commercial real estate sector by mid-2009.