Jamie Dimon says the US can avoid a commercial real estate crisis if the economy sticks a soft landing
- JPMorgan CEO Jamie Dimon said commercial property distress likely won't reach crisis levels.
- But the CEO dismissed analysts' estimates of 70%-80% odds of a "soft landing," saying he predicts "half of that."
Jamie Dimon said the distress in the US commercial property sector won't become a full-blown crisis, and will only deteriorate if the US hits a recession.
The CEO of JPMorgan Chase told CNBC on Monday that many real estate owners can manage the current level of stress weighing on the market, and rising defaults are "a normalization process" as long as the US can steer clear of a recession.
"If we don't have a recession, I think most people will be able to muddle through this, refinance, put more equity in," Dimon said during the bank's high yield and leveraged finance conference in Miami. "If rates go up and we have a recession, there will be real estate problems, and some banks will have a much bigger real estate problem than others."
When it comes to the falling property valuations, the CEO said it's "not a crisis, that's kind of a known thing," while referring to the cratering office market. The sector is facing $150 billion of mortgages maturing by the end of this year and another $300 billion by 2026.
"First of all, they're worth less because of interest rates. When interest rates go up 300 basis points, whatever you own with cash flow is worth 30% less," he said.
Still, Dimon said he doesn't see the 70%-80% odds of a "soft landing" that many market commentators have been predicting, adding that sees odd that are about "half of that."
The fresh wave of regional bank stress, sparked by New York Community Bank slashing its dividend and reporting disappointing earnings last month, has reignited borrowers' concerns reminiscent of the Silicon Valley Bank collapse, and banks' exposure to shaky commercial real estate debt has been worried observers.
But Dimon said he believe that the regional bank problems are unique and should not escalate into a "Whack-A-Mole" scenario with a "domino effect" for the entire financial system.
"The problems you've seen were kind of idiosyncratic problems with Silicon Valley, First Republic, New York Community Bank," he added.