The Fed warns about commercial real estate! It went unnoticed but the last FOMC meeting highlighted some problems… The US financial system | Commercial real estate | Banking leverage. This time, it’s not us who are alerting, it’s the Fed.
by sylsau
The Fed warns about commercial real estate! It went unnoticed but the last FOMC meeting highlighted some problems… The US financial system | Commercial real estate | Banking leverage. This time, it’s not us who are alerting, it’s the Fed.
by sylsau
1 comment
Commercial real estate in the US is overvalued for years now. People were talking about it since before Covid started.
Overvalued CRE now meets reduced demand due to more home office and online shopping, we can already see the first CRE funds starting to get in trouble.
For what it’s worth, we have the same issue in other countries too. Scope (german rating agency) also warned against real estate in general and the ECB warned explicitly against CRE last year.
It should be clear to everyone that a high key interest rate directly leads to a higher leverage in banking. Banks hold a lot of money in bonds, bonds lose value if key interest rates hike. The fed could lower bank leverage in seconds if they lower the key interest rate.
So long story short, nothing new and everybody in finance already knows.