Modest Improvements in Demand, Lending Conditions for Real Estate Loans During Q4 2023

2024-02-12T13:15:13-06:00

According to the Federal Reserve Board’s January 2024 Senior Loan Officer Opinion Survey (SLOOS), lending standards loosened for all commercial real estate (CRE) loan categories and residential real estate (RRE) categories in the fourth quarter of 2023.  Demand for RRE and CRE loans improved across all categories over the quarter, except for government loans. Even though the federal funds rate remained unchanged, the shifting expectations from the Federal Reserve toward rate cuts is having an impact on sentiment among major lending institutions. A higher net percentage of banks reported looser residential mortgage lending standards in Q4  2023 compared to Q3 2023 for all categories of RRE loans.  The largest improvement occurred for Qualified Mortgage (QM) jumbo which fell 10.6 percentage points from 26.0% in Q3 2023 to 15.4% in Q4 2023. GSE-eligible, Non-QM jumbo, and Non-QM non-jumbo experienced decreases of at least 8 percentage points quarter-over-quarter. All RRE categories saw increases in loan demand, except for government loans which saw a 0.4 percentage points decline from Q3 2023 to Q4 2023.  Subprime experienced a dramatic quarterly shift: it had the weakest demand in Q3 2023 (-71.9%) but rose almost 30 percentage points to become the strongest demand category for RRE in Q4 2023 at -41.7%, relatively speaking.  The remaining five RRE categories had demand increases by single-digits quarter-over-quarter. Compared to Q4 2022, all RRE categories increased the share of banks reporting stronger minus weaker demand by at least 30 percentage points. Both multifamily loans as well as all CRE construction and development loans, on net, saw modest improvements in lending conditions from Q3 2023 to Q4 2023. Construction & development experienced the share of banks reporting tightening conditions fall 25.2 percentage points to 39.7%. Multifamily improved by 24.8 percentage points to 40.7% in Q4 2023. Fifty percent of banks reported weaker demand for loans secured by multifamily properties and 46.6% for construction & development loans; This is slightly more positive compared to Q3 2023, where both categories were greater than 50%. Year-over-year, demand for construction & development improved 15.5 percentage points compared to Q4 2022 whereas multifamily experienced a small decrease (-0.7 percentage points). ‹ The Age of the U.S. Housing StockTags: ad&c loans, commercial real estate loans, credit, credit standards, Federal Reserve, GSE, lending, lending conditions, loan demand, loans, monetary policy, mortgage finance, real estate loans, residential real estate loans, sloos, subprime

Modest Improvements in Demand, Lending Conditions for Real Estate Loans During Q4 20232024-02-12T13:15:13-06:00

Consumer Credit Outstanding Edges Higher in October

2023-12-11T14:15:35-06:00

By David Logan on December 11, 2023 • According to the Federal Reserve’s latest G.19 Consumer Credit report, total consumer credit outstanding totaled $4.99 trillion (seasonally adjusted annual rate) in October, an increase of $5.1 billion over the month and $146.7 billion—or 3.0%–higher than October 2022. The monthly increase resulted from revolving and nonrevolving credit outstanding gaining 0.2% and 0.1%, respectively. The level of revolving debt—primarily credit card debt—rose $2.9 billion over the month and $109.9 billion over the year (SAAR). Revolving debt outstanding has increased each of the past four months, although growth slowed in September and October. Revolving and nonrevolving debt accounted for 26.0% and 74.0% of total consumer debt, respectively.  Although it reached a 32-year low in April 2021, revolving consumer credit as a share of the total has slowly risen to its highest level since November 2018. ‹ Household Real Estate Asset Growth Continues in the Third Quarter of 2023Tags: consumer credit, consumer debt, Federal Reserve, g.19, household balance sheets, nonrevolving credit, nonrevolving debt, revolving credit, revolving debt

Consumer Credit Outstanding Edges Higher in October2023-12-11T14:15:35-06:00

Custom Home Building Share Improves in 2022

2023-11-30T10:19:31-06:00

By Ashok Chaluvadi on November 30, 2023 • According to data from the Census Bureau’s Survey of Construction (SOC), custom homes share increased to 20.4 percent of all single-family homes started in 2022 from the 17.6 percent recorded in 2021. The custom home market consists of contractor-built and owner-built houses—homes built one at a time for owner occupancy on the owner’s land, with either the owner or a builder acting as a general contractor. The alternatives are homes built for sale (on the builder’s land, often in subdivisions, with the intention of selling the house and land in one transaction) and homes built for rent. In 2022, 71.4 percent of the single-family homes started were built for sale, and 5.9 percent were built for rent. While the custom-home percentage increased in 2022, the number of custom homes started in 2022 (207,472) was actually higher than the number of custom homes started in 2021 (199,675). The quarterly published statistics show that the custom-home share of single-family starts declined. Although the quarterly statistics are more timely, they lack the geographic detail available in the annual data set. When analyzed by the 9 census divisions, the annual data show that the highest custom home share in 2022 was 45.4 percent in New England Division. In the South Atlantic Division, on the other hand, the share was only 13.8 percent. In the East South-Central Division, 39.6 percent of new homes started were contractor-built or owner-built houses, followed by the East North-Central Division at 37.9 percent and 34.6 percent in the Middle Atlantic Division. In the West North Central Division 23.4 percent of new homes started where custom homes, followed by 15.6 percent in the West South-Central Division, 18.0 percent in the Pacific Division, and 15.5 percent in the Mountain Division. ‹ Unraveling the Complex Tapestry of Inflation Dynamics: Post-Covid ChangesTags: construction, economics, eye on the economy, Federal Reserve, home building, housing economics, single-family, starts

Custom Home Building Share Improves in 20222023-11-30T10:19:31-06:00

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