Declining New Home Sales Push AD&C Residential Construction Loans to Post-Great Recession High

The National Association of Home Builders (NAHB) is reporting that slower new homes sales pushed residential construction loan volumes to a post-Great Recession high during 2022Q3. Outstanding builder loan balances are rising as development debt is being held longer as new homes remain in inventory longer.

The NAHB believes that loan balances will decline in coming quarters as the development load market becomes more costly and tighter given higher interest rates. This is a reminder, they say, that tighter monetary policies impact not only housing demand but housing supplies as well.

According to the NAHB, the volume of 1–4-unit residential construction loans made by FDIC-insured institutions increased more than 5% during Q3. The volume of loans increased by $5.5 billion on a quarterly basis. This loan volume expansion places the total stock of home building construction loans at $102.6 billion, which is a post-Great Recession high.

Residential construction loans are up 18% on a year-over-year basis. Since 2013Q1, the stock of outstanding home building construction loads has increased by 151%, an increase of $61 billion.