In its 2023 annual report, the Financial Stability Oversight Council — a legacy of the Dodd-Frank Act that includes a broad array of federal banking regulators and others — pointed to multiple financial risks for the U.S. First on the list, commercial real estate.

At the top of the CRE section, $6 trillion in loans as of 2023 Q2, with half sitting on the balance sheets of banks, because these don't get sold off to government agencies the way residential mortgages do. CRE loans are also the largest loan category for almost a half of all U.S. banks.

The concentration makes for a systemic weakness, especially as "the CRE market faced a rise in vacancy rates and declines in value for some property types, elevated interest rates, heightened CRE loan maturities, inflation in property operating costs, and an increase in CRE loan delinquencies." None of this should be a surprise to anyone who has been monitoring the market.