“JUST IN: Nearly 700 US banks now exceed the 2006 Commercial Real Estate (CRE) loan concentration guidance. What is the CRE loan concentration guidance? It’s guidance by the FDIC for the amount of exposure that small banks should have to CRE loans. Currently, small banks hold over 70% of CRE loans which is $2 trillion worth of loans. Meanwhile, $1.5 trillion of CRE loans are set to be refinanced at much higher rates by 2025. All as office vacancies are at historic highs and CRE prices are in bear market territory. This is a crisis.”
The CRE crisis has been overshadowed by housing market strength.
There has never been such a large divergence between these markets.
Higher rates are only making things worse for CRE as the refinancing wall approaches.
Follow us @KobeissiLetter for real time as this develops.
— The Kobeissi Letter (@KobeissiLetter) September 26, 2023
A lot of banks are pulling back on lending in part due to losses, or expected losses, within their CRE portfolio.
When lending declines to this extent it flows through to reduced consumer spending.
Stakeholders will push harder to get people back in the office.
— Mark Le Dain (@mark_ledain) September 26, 2023
Clock is ticking on lower #InterestRates… ⏳ https://t.co/T5rZOTXU6r
— Macro Daily Co. (@macrodailyco) September 26, 2023