Charlie Munger is reportedly warning of troubles for the US commercial real estate market

Charles Munger at the Berkshire Hathaway Annual Meeting in Omaha, Nebraska, April 29, 2022.

David A Grogan | CNBC

Charlie Munger believes the US commercial real estate market is in for trouble.

The 99-year-old investor told the Financial Times that US banks were crammed with “bad loans” that would be vulnerable when “bad times hit” and house prices fell.

“It’s not nearly as bad as it was in 2008,” he told the Financial Times in an interview. “But problems happen in banking just like anywhere else.”

Munger’s warning comes as US regulators asked banks for their best and final takeover bids for First Republic by Sunday afternoon, the latest in a turbulent period for mid-sized US banks.

Since the collapse of Silicon Valley Bank in March, attention has turned to First Republic as the weakest link in America’s banking system. The bank’s shares fell 90% last month and then fell further this week after First Republic announced how dire their situation is.

Berkshire Hathaway, where Munger serves as vice chairman, has remained largely on the brink of crisis despite his history of supporting American banks during turbulent times. Munger, who is also a longtime investment partner of Warren Buffett, suggested that Berkshire’s reticence is partly due to risks that could arise from banks’ plentiful commercial real estate loans.

“A lot of real estate isn’t that good anymore,” Munger said. “We have a lot of troubled office buildings, a lot of troubled malls, a lot of troubled other properties. There’s a lot of agony out there.”

Read the full Financial Times interview here.

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