Loans secured by real estate typically make up about one-third of U.S. bank assets, mostly in the form of home loans and commercial loans. Add in mortgage-backed securities, and the banking sector’s long-term average real-estate exposure rises to 42% of total assets. Since then, banks have reduced their exposure to debt linked with real estate, due in part to write-downs of bad loans. The depth of this reduction and its persistence are striking and are critical to judging the valuations of big banks.