The Next Bank Crisis Is Coming Right Up, Commercial Real Estate Implosion

Houston Office Leasing Down 29 Percent

Land Worth More Than the Building 

Cracks in the Edifice

Impending Crisis

Lease Renewals 

More than 50% of the $2.9T in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points"

Who's Holding the Bag?

I discussed the answer in The Exceptionally Poor Timing of Small Bank vs Large Bank Cash Deployment

Here's the key picture.

Monthly average Commercial Real Estate percent allocation of bank assets 

Monthly average Commercial Real Estate percent allocation of bank assets 

Ripe for an Accident

And small banks do not have the deposit cushion of larger banks.

Cash Percentage of Total Assets 2023-03

It would not take much for small banks to blow through that minimal cushion. 

What will the Fed and FDIC do if there is a CRE-inspired run on smaller banks? 

Guarantee everything? 


More By This Author:

Nonfarm Jobs Rise In Line With Expectations In March, Hours Worked Dips
Job Cuts Jump 15% In March, Up 319% From Last Year, Highest Q1 Since 2020
Initial And Continued Unemployment Claims Jump The Most In 15 Months

Disclaimer: Click here to read the full disclaimer. 

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.