Although U.S. banks are increasing their activity for volatile commercial real estate loans, their overall exposure to these funds remains below recent highs. According to a new report from S&P Global, banks reported a double-digit increase in the aggregate balance of high-volatility commercial real estate (HVCRE) loans in the second quarter, rebounding from a four-year low in the first quarter of 2024.

HVCRE loans are credit facilities primarily used to finance or refinance the acquisition, development, or construction of properties. They are typically employed to fund projects that aim to turn properties into income-producing assets, relying on future income, sales, or refinancing for repayment.

These loans do not include financing for one-to-four-family residential properties, community development projects, agricultural land, or existing income-producing properties secured by permanent financing. Additionally, they exclude real estate loans made before January 2015.