US real estate market will be ‘very ugly’ next year, Howard Lutnick warns

The CEO of a top financial services firm is sounding the alarm over a “very ugly” real estate market in the next two years.

Speaking to Fox Business host Maria Bartiromo at the World Economic Forum in Davos, Switzerland, Cantor Fitzgerald CEO Howard Lutnick said a “generational” shift was on the horizon, warning of a massive default in loan sales.

“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,” Lutnick stressed. 

“I think it’s going to be a very, very ugly market in owning real estate over the next, you know, 18 months, two years,” he added. 

He explained that high rates would result in commercial loans being “wiped out.” 

“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. 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,” he said. 

The CEO also revealed his candid assessment of the markets, warning that people are “overly optimistic” about the Federal Reserve and the future of rate hikes.

“I think rates are going to stay sort of steady eddie. I think all this talk of 175 basis point cuts, that’s just way too much. Way too much. I think [it] could be 50 basis points, maybe 75. But that’s it. So I just think it’s overdone. People are overly optimistic for rates. I think we’re going to stay around here. But that’s okay. The world is ready for steady,” Lutnick said.