Single-family Construction Loan Volume Grows

2025-06-20T10:15:46-05:00

Credit conditions for builders and developers eased in the first quarter of 2025 as the level of outstanding 1-4 family residential construction loans rose for the first time in two years, according to data released by FDIC. While the volume of 1-4 family residential construction loans rose, a drop in other real estate development loans offset the increase, resulting in the fifth straight quarterly decline in the total volume of outstanding acquisition, development, and construction loans. In the first quarter of 2025, the total level of outstanding acquisition, development, and construction loans fell to $478.3 billion, down 4.1% from a year ago. This was driven by the drop in other real estate development loans, which fell to $388.2 billion, down 3.8% compared to the a year ago. The volume of 1-4 family residential construction and land development loans totaled $90.0 billion in the first quarter, down 5.2% from a year ago. On a quarterly basis, this volume is up 0.6% from $89.5 billion one quarter ago. It is worth noting, the FDIC data represent only the stock of loans, not changes in the underlying flows, so it is an imperfect data source. Nonetheless, lending remains much reduced from years past. The current amount of existing 1-4 family residential AD&C loans now stands 56% lower than the peak level of residential construction lending of $204 billion reached during the first quarter of 2008. Alternative sources of financing, including equity partners, have supplemented this capital market in recent years. Quality Metrics of Construction Loans Along with the volume increase of 1-4 family residential construction loans, the share of the volume that is 30+ days past due or nonaccrual status grew in the first quarter. The total level of past due and nonaccrual loans was $1.2 billion, up 24.4% from $978.4 million a year ago. As a share of the total 1-4 family residential construction loan volume, this accounts for only 1.4% but is notably the highest share since 2015. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Single-family Construction Loan Volume Grows2025-06-20T10:15:46-05:00

Residential Mortgages Experience Weaker Demand in First Quarter

2025-05-13T09:18:21-05:00

Overall demand for residential mortgages was weaker while lending standards for most types of residential mortgages were essentially unchanged1 according to the Federal Reserve Board’s April 2025 Senior Loan Officer Opinion Survey (SLOOS).  For commercial real estate (CRE) loans, lending standards for construction & development were moderately tighter, while demand was modestly weaker.  However, for multifamily loans within the CRE category, lending conditions and demand were essentially unchanged for the second consecutive quarter.  The Federal Reserve left its monetary policy stance (i.e., Federal Funds rate) unchanged during its most recent meeting stating that the Fed “is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”  Nevertheless, NAHB is maintaining its forecast for interest rate cuts in the second half of 2025. Residential Mortgages In the first quarter of 2025, only one of seven residential mortgage loan categories saw a slight easing in lending conditions, as evidenced by a positive2 value for GSE-eligible loans, which was +3.2 in the first quarter of 2025.  Subprime and government loans both recorded a neutral net easing index (i.e., 0) while the other four categories (Non-QM jumbo; Non-QM non-jumbo; QM non-jumbo, non-GSE-eligible; QM jumbo) were negative, representing tightening conditions.  The Federal Reserve classifies any net easing index between -5 and +5 as “essentially unchanged,” however.  By this definition, lending standards changed significantly for only one category of residential mortgages: non-QM jumbo (-7.5). All residential mortgage loan categories reported significantly weaker demand in the first quarter of 2025, except for QM-jumbo which was essentially unchanged.  The net percentage of banks reporting stronger demand for most of the residential mortgage loan categories has been negative since mid-2022. Commercial Real Estate (CRE) Loans Across CRE loan categories, construction & development loans recorded a net easing index of -11.1 for the first quarter of 2025, indicating tightening of credit conditions.  For multifamily loans, the net easing index was -1.6, or essentially unchanged. Both categories of  CRE loans show at least three consecutive years of tightening lending conditions (i.e., net easing indexes below zero).  However, the tightening has become less pronounced recently—especially for multifamily, with its net easing index rising (i.e., becoming less negative) for six straight quarters. The net percentage of banks reporting stronger demand was -6.3% for construction & development loans and -1.6% for multifamily loans, the negative numbers indicating weakening demand.  Like the trend for lending conditions, demand for CRE loans has become less negative recently, especially for multifamily loans  where the net percentage of banks reporting stronger demand has risen (i.e., become less negative) for six consecutive quarters. The Federal Reserve uses the following descriptors when analyzing results from the survey which will be used, in principle, within this blog post as well: – “Remained basically unchanged” means that the change or actual reading is greater than or equal to 0 and less than or equal to 5 percent. – “Modest” means that the change or actual reading is greater than 5 and less than or equal to 10 percent. – “Moderate” means that the change or actual reading is greater than 10 and less than or equal to 20 percent. – “Significant” means that the change or actual reading is greater than 20 and less than or equal to 50 percent. – “Major” means that the change or actual reading is greater than or equal to 50 percent.A value above zero (i.e., positive) indicates that lending conditions are easing while a value below zero (i.e., negative) indicates that lending conditions are tightening. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Residential Mortgages Experience Weaker Demand in First Quarter2025-05-13T09:18:21-05:00

About My Work

Phasellus non ante ac dui sagittis volutpat. Curabitur a quam nisl. Nam est elit, congue et quam id, laoreet consequat erat. Aenean porta placerat efficitur. Vestibulum et dictum massa, ac finibus turpis.

Recent Works

Recent Posts