Tesla CEO Elon Musk warned about a risk that looms large for the housing market, repeating a thought he expressed a year ago.
“Commercial real estate is melting down fast. Home values next,” Musk tweeted on Monday. The statement came in response to an observation by David Sacks about the commercial real estate market in Los Angeles and San Francisco.
Sacks, a tech entrepreneur and investor, noted that “LA office towers are selling for less than the amount of debt on them. This is true for SF too and other big cities.” His comments came as a quote-tweet of another Twitter user, who shared a story about the state of the commercial real estate market in these two cities.
L.A.’s office towers have, on average, $230 in debt per foot, while the only building to sell this year went for $154 per foot, the Twitter user said.
“Commercial real estate is melting down fast. Home values next,” Musk said in a tweet.
Musk’s previous warning about the housing market came as a response to a tweet by Dogecoin co-founder Billy Markus, who goes by the Twitter name Shibetoshi Nakamoto.
Musk chimed in with his view that the mistake was assuming that house prices only go up.
He also clarified that he doesn’t support predatory lending – a term that refers to unfair lending practices such as charging unfairly high interest rates and fees. Many of the lenders were severely wounded or didn’t survive, he observed.
“They dug their own graves – a lesson we should all take to heart, including me,” Musk said.
The housing market collapse of 2008 that followed a bubble was triggered by a combination of predatory lending practices and financially engineered products such as subprime loans that left borrowers saddled with unaffordable mortgages.
Produced in association with Benzinga
Edited by Alberto Arellano and Sterling Creighton Beard