So, the Fed raised rates again. It's hard to make money as a small bank when you supplied long-dated loans (i.e. 10 and 30 yr mortgages) at < 3% when your depositors are also asking for > 4% on their deposits. It's further harder to make new loans at 7% on fresh mortgages when that becomes too expensive for people on home prices that are already out of reach. Something has to give. There will be a housing crash (in some markets more than others) and, as commercial real estate investors can get 5% by just sitting in T-Bills, they will require higher cap rates which means Sellers are going to need to reduce their asking prices, further compressing profitability.
And this doesn't even take into account that many office landlords took out 5 yr loans prior to the pandemic and, now that workers are not returning to the office, tenants are breaking leases as those loans are about to reset at much higher rates.
