- Household debt has grown to record levels, but household assets have grown, too – and debt as a percentage of assets has fallen.
- Across all households, debt as a share of total assets is significantly lower compared to history.
- Given the strength of the fundamentals in apartments, industrial, and even retail, one can discount the risks in these sectors as implied in the headlines.
- The office market is challenged in certain buildings and locations. Yet even assuming a worst-case scenario of building values declining -50%, it implies loan losses of only 0.5% of banks’ total assets.
- In the aggregate, the banking sector appears reasonably well capitalized and commercial real estate risks seem concentrated in certain regions and across certain classes of buildings in the office market.