Skyscraper Prices Might Start Returning to Earth – WSJ.com

WSJ.com reports Skyscraper Prices Might Start Returning to Earth(subscription required).

In part because “On April 11, Moody’s Investor Service sent up a warning flare, saying that lenders had gotten too aggressive and underwriting standards had become too lax.”

The sub-prime lenders in the residential market running into trouble was the warning sign for the collapse of the residential real estate market. Could the warning on debt for the commercial markets signal a decline in the commercial real estate sector?

Probably not. As the story points out “Demand for real estate remains strong among foreign buyers eager to take advantage of the weak dollar, and among institutional investors, who have roughly $1.8 trillion — as much as four years’ worth of money — queued up ready to invest in real estate.” There is still a tremendous demand for institutional real estate that will keep prices up. The issue is whether purchasers and lenders should be underwriting based on the rapid increases in rent.

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