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Appraisal data shows scale of value destruction in US real estate

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Commercial properties hit by the economic effects of coronavirus could have lost as much as one-quarter of their value or more, laying bare the scale of the damage being wrought across American malls, hotels and other commercial buildings.

Evidence emerging in the commercial mortgage-backed securities (CMBS) market from recent appraisals also raises questions over the value of the collateral backing commercial mortgages throughout the financial system.

Properties that have gotten into trouble are being written down by 27 per cent on average, data from Wells Fargo shows. New appraisals are triggered when a commercial property owner starts to have trouble paying the mortgage, and the loan is handed to a “special servicer” that could eventually seize the property on behalf of CMBS holders.

“It’s a big number,” said Lea Overby, an analyst at Wells Fargo. “This is material.”

Recent examples show hotels being especially hard hit, given the collapse

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HOME VALUES 

U.S. existing home sales approach 14-year high; prices scale record peak

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By Lucia Mutikani

WASHINGTON (Reuters) – U.S. home sales surged to their highest level in nearly 14 years in August as the housing market continued to outperform the overall economy, but record high home prices could squeeze first-time buyers out of the market.

The report from the National Association of Realtors confirmed home sales had recovered after slumping when the economy almost ground to a halt as businesses were shuttered in mid-March in an effort to slow the spread of COVID-19.

Demand for housing is being fueled by record-low mortgage rates and a pandemic-fueled migration to suburbs and low-density areas in search of more spacious accommodation as many people work from home. Federal Reserve Chair Jerome Powell told a congressional panel on Tuesday that the economy has shown “marked improvement” since plunging into recession in February, though the path ahead remains uncertain.

“The housing market has continued its remarkable recovery

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