Financing for Housing Faces Major Hurdles

 

Of those polled, 63% of builders said that the availability of loans for single-family construction was worse. That was down from the more than 70% who reported in previous surveys that availability was worse. While the percentage saying availability is worse remains high, it is at least down from the peaks reported in late 2008 and early 2009.
Courtesy of Nascor Walls

For about three years now, builders have faced increasing difficulty in obtaining AD&C loans. Not only have builders found it increasingly difficult to obtain these loans, but in many cases they have faced significant adverse changes to existing loans — including reductions in lines of credit, demands for increased equity for outstanding loans and, in some cases, demands for full repayment of outstanding loans.

These types of increased requirements have transformed many performing loans into non-performing loans.

In the Federal Reserve’s third quarter survey of senior loan officers of large regional banks conducted in July, 46% of the 54 banks responding said that over the previous three months they had tightened credit standards for commercial real estate loans. This includes residential AD&C loans. That marked more than three years of continually tightening lending standards for commercial real estate loans.

The one positive is that the net percentage of banks tightening these loan standards has fallen each of the last three quarters. These results were reflected in the second quarter builders’ survey regarding AD&C lending, where 64% of builders said that credit conditions for acquisition debt were worsening, down from more than 80% reported in the last several surveys.

Courtesy of NAHB