Accelerated New Home Sales Growth Helps to Reduce the Volume of Outstanding Construction Loans

According to survey data gathered by the National Association of Home Builders (NAHB) the volume of residential construction lending posted a modest decline during Q4 of 2020. This continues a pattern of volume declines that began at the end of 2019. The overall declines in residential construction loans can be contributed to increased sales growths, which in turn reduced outstanding loans at a faster pace and the higher interest rates for AD&C financing. The volume of 1–4-unit residential construction loans made by FDIC-insured institutions declined by -1.5% during the fourth quarter, as new homes sales accelerated. The volume of loans declined by $1.1 billion at the end of the year. This loan volume contraction placed the total stock of home building construction loans at $77.3 billion. On a year-over-year basis, the stock of residential construction loans is down -3.1%, with quarterly loan declines in four of the last five quarters. Since the first quarter of 2013, the stock of outstanding home building construction loans has grown by 90%, an increase of almost $36.6 billion.