Elon Musk is once again ringing the alarm on the US real-estate sector.
“Commercial real estate is melting down fast. Home values next,” the Tesla and SpaceX chief tweeted on Monday.
The tech billionaire made the comment in response to a tweet by the Craft Ventures founder David Sacks, who said that a big chunk of commercial real-estate debt was due to mature soon.
Musk has previously warned that cracks could appear in property markets following turmoil in the banking sector. For example, the clean-energy pioneer said commercial real estate was “by far the most serious looming issue,” and cautioned regional banks could experience a wave of defaults because of their huge exposure to the sector.
The debt-fueled industry has kept investors on edge in recent months, given that it faces a raft of headwinds. These include higher interest rates, tighter credit conditions, and work-from-home trends.
JPMorgan estimated that about $450 billion in commercial real-estate debt set to expire this year could default. Meanwhile, Morgan Stanley Wealth Management said commercial-property prices could tumble 40% from their peak in light of the sector’s troubles.
The US housing market is also dealing with similar problems, which likely explains Musk’s view that prices were set to topple. Morgan Stanley reported that home sales have bottomed as higher borrowing costs crippled demand with experts warning of a potential 15% to 20% plunge in prices.