Whether we’re merely late in the game or already in extra innings, this economic cycle will necessarily end. When it does, the industry needs to make sure that CRE doesn’t get rained out completely.
Most of CRE transactions comes down to the flow of debt financing as the vital liquidity that keeps the industry engine well-oiled. With that in mind, ironically, it’s the “dry” banking system that determines if the engine stalls.
For now, overall, the system continues to function, as it should, safely providing liquidity. However, we have concerns. For that reason, we at CrediFi determined to do an in-depth study of the lending ecosystem (including both banks and non-banks) to see how the system is holding up, and where stress can be anticipated. This study is backed up by detailed data from CrediFi’s national lending database.
We recently published this report, the CrediFi CRE Lending and Bank Risk Report, and it’s been getting a lot of advanced media coverage. You can download the full report below.
Overall, we track “risk signals” and our data indicates that some banks’ balance sheets may be at greater risk than previously believed by financial professionals and regulators. The report details, as one area of concern, levels of lending to the retail and industrial sectors, especially in the event of a possible downturn.
More broadly, we at CrediFi keep an eye on several risk signals on banks, including their LTV levels across their loan portfolios; outsized or out-of-norm loans, and other forms of heightened risk-taking, like construction lending. These are among the elements of our CrediFi Lender Watchlist.
For the moment, delinquencies are still extremely low, and the engine keeps running. Take a look at the report to understand what could happen if the engine stalls.