Wall Street crisis will have fallout for all US property sectors
Turmoil on Wall Street is set to affect the whole of the property market in the US, economists are warning.
The US commercial property market is next in line as many of New York's financial buildings face uncertainty.
US and Canadian property firms, such as Brookfield Asset Management Inc., own many of the buildings in Manhattan and across the United States where the investment firms are housed.
Lehman's bankruptcy, for example, could result in more offices on the rental market in a time when the US economy is still slowing. The situation will also hurt property management firms.
The stock market crisis will affect the whole of the property sector and every person that owns a home in the US, economists are warning.
'It isn't the end of the world but there will be a substantial impact on the economy,' said Sherry Cooper, chief economist at BMO Financial Group Inc.
'The damage is widespread and not confined. It will hurt across the property sector, no one will be immune,' she added.
Individuals face increased problems securing low-cost money to cover mortgage payments. As a result, the value of the largest asset most people own, their main residence, keeps sliding.
As Americans watch the value of their homes decline, so does their ability to borrow to buy cars and make other major purchases. Banks sometimes use the deed to one's home as collateral for other borrowing.
Besides homes, many Americans own a substantial portfolio of stocks and other paper investments. As North American stocks fall, however, so does overall wealth.
In 2005, for example, more than 50% of American households and more than 90 million individuals owned some equities, or stocks.
With the Dow Jones industrial average off 21% from its 52 week high, men and women in the US are basically less wealthy and, as a result, are shopping less. US retail sales fell 0.3% in August or 0.7% after subtracting vehicle purchases.
That represented the second consecutive month when retail sales dropped and might be an indication of American consumer thinking, according to economists.