S&P: The proverbial “other shoe” hasn’t dropped yet, but it will

The commercial real estate market continues to be a source of economic pessimism, with a new report from Standard & Poor’s predicting further bank losses stemming from the beleaguered sector. “The fallout from commercial real estate exposures for banks has yet to run its course,” the S&P report said, noting that multi-family properties and mortgage lending have thus far been shielded by low interest rates and adequate cash flows for debt servicing. When those conditions fade — interest rates will rise and rent rolls will decline further amid high vacancies and low rents — those sectors, too, would begin to feel the pain already plaguing homebuilding and commercial construction, S&P said. The rating agency warned that downgrades are possible even for banks with ratings already below investment grade. [Reuters]