Weaker Demand for Home Construction Loans Reported in Q1 of 2022

The Federal Reserve Board’s Senior Loan Officer Opinion Survey (SLOOS) for Q1 of 2022, with further analysis provided by the National Association of Home Builders (NAHB), reveals that Bank Lending Practices showed a significant net share of banks reporting more relaxed lending standards and weaker demand for most categories of residential real estate (RRE) loans.

“Significant” net shares of banks reported weaker demand for all RRE loan categories other than subprime residential mortgages, for which only a “moderate” share on net reported weaker demand.

Demand and lending standards for all Commercial Real Estate (CRE) loan categories, except for multifamily loans, remained unchanged. For loans secured by multifamily residential properties, banks reported eased lending standards and reported stronger demand. In Q1 of 2022, multifamily loans’ demand, on net, was 18.5% stronger. In the survey, 26.6% of banks reported moderately stronger demand and 66.2% of banks reported unchanged demand. The questions were subdivided between large commercial banks and other commercial banks.

Banks’ lending standards for loans secured by nonfarm nonresidential properties remained unchanged from the prior quarter and demand for such loans also were unchanged.

Residential real estate loan demand was weakest for qualified mortgage (QM) jumbo loans, with 51.9% of banks reporting weaker demand. 17.6% of banks reported stronger demand for revolving home equity lines of credit, exceeding the shares of banks’ reporting stronger demand in the other RRE categories. Banks’ lending standards eased most visibly for QM jumbo and non-QM jumbo loans, the segment that is pricing out many first-time homebuyers.

Through Q1 of 2022, moderate and modest net shares of banks eased standards for credit card and auto loans, respectively, while banks reported having left lending standards unchanged for other consumer loans. Auto and credit card loans are components of nonrevolving and revolving debt, respectively, as covered in the Federal Reserve’s G.19 Consumer Credit report.