Third wave of the crisis

Via Atrios, some ugly reality on the economic situation from Kevin Hall of McClatchy. Fortunately, commercial mortgages are a much smaller part of the market than residential. The bad news is that the Alt-A/Prime crisis is rising now, so there’s going to be prolonged downward pressure on the economy, lasting probably through mid 2010.

Thousands of commercial mortgages valued at hundreds of billions of dollars are approaching their renewal dates, and by some estimates, two out of three no longer will meet the original loan conditions and won’t be able to refinance. With prices for commercial properties expected to plunge, a vicious cycle could unfold, much as it has in the nation’s housing market…

A commercial mortgage meltdown is likely to prolong the nation’s economic recovery. Falling prices of commercial real estate would lead to additional bank losses at a time when banks already are sapped by home mortgage defaults and soaring credit card defaults. This could lead to future additional taxpayer assistance for the banks.