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Reports predict that the US co...The Fed's aggressive approach to containing increasing inflation may be to blame for the current banking crisis
The sudden collapse of several regional banks has added to the instability in the US banking industry. The US commercial real estate industry could experience its next catastrophe. According to Charlie Munger of Berkshire Hathaway Inc., trouble is coming for the US commercial real estate market as a result of the banks' oversupply of subprime loans, which was discussed in an interview with the Financial Times. The Fed's aggressive approach to containing increasing inflation may be to blame for the current banking crisis. The fractures in the US commercial real estate sector, however, may force banks to deal with yet another crisis in addition to rising interest rates.
In a report on the current evaluation of the health of the U.S. financial system that was released in May 2023, the Federal Reserve noted that commercial real estate prices had declined but valuations had remained high. The survey said that commercial real estate prices are still high, suggesting that there may be a big decline in property values. The Fed estimates that banks hold around 60% of commercial real estate loans, with smaller lenders with assets under $100 billion holding the other 35%. Banks reported lower demand and stricter requirements for all CRE loan categories over the fourth quarter of 2022 in the Senior Loan Officer Opinion Survey (SLOOS) conducted in January 2023.