Lending Standards Loosened for Commercial and Residential Real Estate Loans in 2023Q4

According to the Federal Reserve Boards’ January Senior Loan Officer Opinion Survey (SLOOS), with additional analysis provided by the National Association of Home Builders (NAHB), lending standards loosened for all commercial real estate (CRE) loan categories and residential real estate (RRE) categories in 2023Q4.

Demand for CRE and RRE loans improved across all categories during the quarter, except for government loans. Even though the federal funds rate remained unchanged, the shifting expectations from the Federal Reserve towards rate cuts is having an impact on sentiment among major lending institutions.

The SLOOS reported that a higher net percentage of banks reported looser residential mortgage lending standards in Q4 when compared to Q3 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 to 15.4% in Q4. GSE-eligible, Non-QM jumbo, and Non-QM non-jumbo experienced decreases of at least 8 percentage points quarter-over-quarter.

Both multifamily loans as well as all CRE construction and development loans, on net, saw modest improvements in lending conditions from Q3 to Q4. Construction and development saw 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%.