NEW YORK, Sept 30 (Reuters) - Goldman Sachs on Tuesday advised investors to shy away from banks and insurance companies that are heavily focused on commercial real estate, saying that the downturn in commercial real estate was more severe than Goldman had expected.
"Prices have yet to stabilize and thus are likely to overshoot our original estimates further," Goldman analysts said in a report.
Appraisal values have fallen 25 percent. Goldman expects a decline from peak levels in 2007 of 40 percent to 42 percent, a much steeper declined than the 28 percent it expected.
Sales prices have plunged 39 percent from their peak prices verses Goldman's prior estimate 24 percent.
At the same time, vacancy rates have risen 35 percent versus the 17 percent Goldman had expected. Rents have fallen by 9 percent, translating into fundamentals that have deteriorated by more than twice the rate Goldman anticipated.
Goldman expects $287 billion of losses on commercial real estate and construction loans.
