Banks Report Unchanged Home Lending Standards


By Litic Murali on August 3, 2022 • In the second quarter iteration of the Federal Reserve Board’s Senior Loan Officer Opinion Survey (SLOOS) on Bank Lending Practices, banks reported largely unchanged lending standards across all residential real estate (RRE) loans. Major net shares of banks reported weaker demand for most RRE loans except for home equity lines of credit, for which a significant net share of banks reported stronger demand. The second quarter also saw tighter credit standards for Commercial Real Estate (CRE) loans and Commercial and Industrial (C&I) loans. The below figure derived from the SLOOS shows that RRE credit standards relative to the first quarter of 2022, tightened by no more than 5.6 percent, except for subprime mortgages for which banks tightened standards by 12.5 percent. Government-issued mortgages, such as FHA and VA loans, were the only category of RRE loans that showed a loosening of credit standards, that too, by a negligible amount of -1.9 percent. Although major net shares of most banks reported weaker demand for RRE loans, a small fraction of banks reported moderately to substantially stronger demand across all loan categories except subprime residential mortgages. For loans extended to homeowners based on their homes’ market values, a positive net share of 41.1 percent of banks surveyed reported moderately stronger demand for home equity lines of credit and 5.4 percent of banks reported substantially stronger demand. Meanwhile, banks reported tighter lending standards for all Commercial Real Estate (CRE) loan categories and weaker demand in construction and land development loans and nonfarm nonresidential loans. A modest net share of banks, 6.1 percent, reported stronger demand for loans secured by multifamily residential properties. In Q1 2022, multifamily loans’ demand, on net, was 18.5 percent stronger. In the following quarter’s survey, 4.5 percent of banks reported substantially stronger demand, 18.2 percent indicated moderately stronger, and 60.6 percent of banks reported unchanged demand. The questions were subdivided between large commercial banks and other commercial banks.In SLOOS’s last category, Commercial and Industrial (C&I) loans, banks reported a tightening of lending standards across all firm sizes, citing unfavorable economic conditions for the tightening. Thirty-three percent of banks reported moderately stronger demand for C&I loans made to large and middle-market firms while 29 percent of banks reported moderately stronger demand for loans made to small firms. Interestingly, the survey asks banks to use only funds disbursed to measure C&I loan demand. Related ‹ More Prospective Buyers Are Actively Searching for a HomeTags: federal reserve board, Senior Loan Officer Opinion Survey, sloos

Banks Report Unchanged Home Lending Standards2022-08-03T12:17:07-05:00

Household Balance Sheets in the First Quarter


By Litic Murali on June 13, 2022 • The latest results from the Federal Reserve’s Z.1 Financial Accounts of the United States, i.e., the Flow of Funds, show that in the first quarter of 2022, the aggregate market value of all owner-occupied real estate in the United States showed the largest year-over-year percentage gain since 2001. Owners’ equity as a percentage of households’ real estate was the highest since 1986. From $38.1 trillion in the fourth quarter of 2021, the market value of owner-occupied real estate increased by $1.6 trillion to $39.7 trillion in the first quarter of 2022, on a non-seasonally adjusted basis. Households real estate assets’ year-over-year gain in the first quarter was 16.2%, breaking the previous quarter’s record for the largest post-Great Recession increase. Staggering and unprecedented home price growth, an ongoing phenomenon since the pandemic, was the main contributor to the increase in market value. Remodeling is another factor that boosts a house’s market value but held steady during this period. Real-estate secured liabilities of households’ balance sheets, i.e., mortgages, home equity loans, and HELOCs, showed an increase of $0.2 trillion to $12.0 trillion from the previous quarter. This also marked an 8.4% year-over-year gain, the largest such increase since the first quarter of 2007. The change in the value of total home mortgages owes to a combination of new loans taken out for home purchases and the aggregate unpaid principal balance of all existing mortgages. This period’s increase, then, may have owed more to the heated market catering mostly to those who could afford more expensive homes, as evidenced in the Mortgage Bankers Association’s Weekly Application Surveys from the first quarter. Aggregate owners’ equity, i.e., the difference between homeowners’ real estate-secured assets and liabilities, rose to $27.8 trillion or 70% of all owner-occupied household real estate. Home equity’s value is many homeowners’ source for financing remodeling projects, collateral against which loans can be taken out (home equity lines of credit or home equity loans). Related ‹ What Do Home Buyers Buy after MovingTags: federal reserve board, financial accounts of the united states, homeowner equity, house price growth, household balance sheets, owners' equity, remodeling

Household Balance Sheets in the First Quarter2022-06-13T15:19:40-05:00

Consumer Credit Increases in First Quarter


By Litic Murali on May 9, 2022 • In the first quarter of 2022, non-real estate secured consumer credit, per the Federal Reserve’s latest G.19 Consumer Credit report, grew at a seasonal adjusted annual rate of 9.7%, with revolving debt growing at 21.4% and nonrevolving at 6.1%. Total consumer credit currently stands at $4.5 trillion, with $1.1 trillion in revolving debt and $3.4 trillion in non-revolving debt. From the previous quarter, total consumer credit increased by $107 billion, with revolving debt and non-revolving debt increasing by $56 billion and $51 billion, respectively. As the G.19 data are not inflation adjusted, it is reasonable to assume that part of the consumer credit growth, notably revolving debt, owes to recent price levels’ skyrocketing. However, even after adjusting for inflation, American households’ appetite for services increased (in part due to the lifting of COVID restrictions) and for goods was forcibly reduced. On the other hand, nonrevolving debt, which is closed-ended credit, grew moderately and was higher than pre-pandemic levels.With every quarterly G.19 report, the Federal Reserve releases a memo item covering student and motor vehicle loans’ outstanding levels on a non-seasonally adjusted basis. The most recent memo item indicates that, as of the first quarter of 2021, student loans stood at $1.8 trillion and motor vehicle loans stood at $1.3 trillion. Annualized, the changes in these two categories from the previous quarter are $58.4 billion and $83.6 billion, respectively. Together, these loans’ make up 90% of non-revolving debt (NSA), a share that has held approximately constant historically. Rising production costs resulting from ongoing supply chain issues and high interest rates have together kept car prices and, effectively, auto loan debt elevated. Related ‹ Solid Job Gains in AprilTags: auto loans, consumer credit, COVID-19, credit cards, federal reserve board, g.19, inflation, interest rates, non-revolving debt, student loan debt, supply chains

Consumer Credit Increases in First Quarter2022-05-09T13:21:39-05:00

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