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Mixed Signals From Real Estate and Regional Banks
Motley Fool Money
The Reset in Commercial Building Valuations Hurts the Banks
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Nearly 90% of commercial loans are done on what's known as an interest-only basis. That means unlike your mortgage at home where you're paying principal every single month and slowly paying things down so that your last payment will be of equal size at your first payment. In the case of commercial buildings, they have interest only and then they're going to come up to a period of time in which they have to satisfy the entirety of the loan by paying it off. The flip side of that is the cash flows in for the buildings. And so we are looking at a massive potential reset in those valuations, which hurts the banks.
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