Residential Construction Loan Volumes Decreased in Q2 2020

The volume of residential construction lending posted a slight decline during Q2 2020. The decline is in step with a significant drop for the NAHB/Wells Fargo Housing Market Index and a 24% drop in single-family starts during the quarter. The volume of 1-4-unit residential construction loans made by FDIC-insured institutions declined by only -1.4% during the second quarter, as builders prepared for summer rebound. On a year-over-year basis, the stock of residential construction loans is up just 0.7%, continuing a period of weakness that began with the housing soft patch of 2018/2019. Since the first quarter of 2013, the stock of outstanding home building construction loans has grown by 97%, an increase of almost $39.5 billion. Additionally, builders are citing concerns about construction loan access, with reported first quarter lending conditions at the tightest levels since 2011. However, the credit tightness did show signs of easing during the second quarter, indicating that construction loan volume will grow during the third quarter.

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Construction Loan Volume Contracts During 2Q20