AD&C Loan Balances Increase in Q1 of 2022

In Q1 of 2022, residential construction loan volume reached a post-Great Recession high, as home building activity entered a new year with higher interest rates. With the single-family building markets slowing in 2022, it is expected that the volume of such loads will likely peak in the upcoming quarters.

In Q1, the volume of 1-4 unit residential construction loans made by FDIC-insured institutions increased by 5%. The volume of loans increased by $4.6 billion on a quarterly basis. This loan volume expansion placed the total stock of home building construction loans at $92.4 billion, a post-Great Recession high. On a year-over-year basis, the stock of residential construction loans is up 18%. Since Q1 of 2013, the stock of outstanding home building construction loans has grown by 127%, an increase of almost $52 billion.

The FDIC data reveal that the total decline from peak lending for home building construction loans continues to exceed that of other AD&C loans (nonresidential, land development, and multifamily). Such forms of AD&C lending are off a smaller 26% from peak lending. For Q1 of 2022, these loans posted a 2.3% increase.

Of note: The FDIC data represent only the stock of loans, not changes in the underlying flows, so it is an imperfect data source. Lending remains reduced from years past. The current amount of existing residential AD&C loans now stands -55% lower than the peak level of residential construction lending of $204 billion reached during Q1 of 2008. Alternative sources of financing, including equity partners, have supplemented this capital market in recent years.