New reports from the Federal Deposit Insurance Corporation and Mortgage Bankers Association show a somewhat puzzling state of commercial real estate: more than $3 trillion in outstanding loans but commercial and multifamily loan originations down 53% year-over-year in Q2, although up 23% from Q1.

First, the FDIC's 2023 Risk Review. At the end of 2023 Q1, bank-held CRE loans had exceeded $3 trillion in value. Community banks had 28%, or $865 billion, of the CRE loans on bank balance sheets, "a share that remains outsized compared to their holdings of 15% of total loans."

The FDIC found that "elevated concentrations in CRE lending" persisted among banks, even with falling valuations and concerns about various types of properties, office especially. The agency wrote, "All FDIC Regions saw a rise in the median CRE loan concentration level compared to a year earlier; exposure remained the heaviest in banks headquartered in the West and the Northeast."