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Search A A A REAL ESTATE RESEARCH ABOUT July 10, 2013 REAL ESTATE RESEARCH SEARCH Real Estate Research provided analysis of topical research and current issues in the fields of housing and real estate economics. Authors for the blog included the Atlanta Fed's Jessica Dill, Kristopher Gerardi, Carl Hudson, and analysts, as well as the Why Housing Rebound May Continue at a Slower Rate Than Hoped For Search RECENT POSTS Perhaps it's because I've worked with bank examiners for many years, but I often question financial news that seems too optimistic. On July 1, 2013, the U.S. Assessing the Size and Spread of Vulnerable Renter Households in Census Bureau reported that overall construction spending increased in May. Private residential construction, which generally leads the economy, grew 24.4 the Southeast What's Being Done to Help Renters In December 2020, content from Real Estate Research became part of percent from May 2012 to May 2013. Beyond being cautious with one data point, I think that there are several reasons why housing's rebound may be slower than during the Pandemic? An Update on Forbearance Trends Policy Hub. Future articles will be released in Policy Hub: Macroblog. hoped. Examining the Effects of COVID-19 on the Southeast Housing Market To be clear, residential real estate conditions have been improving, albeit from record low levels of activity. Sales of both new and existing houses have been Southeast Housing Market and COVID-19 trending up recently, but remain near historically low levels. Additionally, the quantity of new and existing homes readily available for sale is low. Update on Lot Availability and Construction Lending Homebuilders in the Sixth Federal Reserve District (which includes Alabama, Florida, and Georgia and parts of Louisiana, Mississippi, and Tennessee) Tax Reform's Effect on Low-Income Housing recently reported that new home sales and construction have been ahead of year-earlier levels and that buyer traffic remains strong (see this SouthPoint Housing Headwinds Where Is the Housing Sector post). Builders noted, however, that access to financing and a shortage of developed lots continued to constrain construction activity. In conjunction with Headed? Did Harvey Influence the Housing the recent construction spending data release, it is this last point that I aim to dig into a bit deeper in this blog post. Market? CATEGORIES Since the housing bust, construction and development (C&D) lending has been Affordable housing goals in sharp decline in terms of aggregate dollars and as a percent of total bank assets. Using year-end data, we find that C&D loans peaked in 2007 at $629.4 Credit conditions Expansion of mortgage credit billion. As of 2012, they stood at $203.8 billion. As of March 2013, C&D loans accounted for 1.4 percent of bank assets, unchanged from December 2012 and Federal Housing Authority Financial crisis the lowest level since at least 1991. The decline in C&D lending is broad based given that similar trends are seen for banks under and over $1 billion in total Foreclosure contagion Foreclosure laws assets. With the recent reports of growing construction spending, will bank lending practices dampen construction growth going forward? Governmentsponsored enterprises GSE Banks represent a significant funding source for homebuilders, especially Homebuyer tax credit Homeownership nonpublic homebuilders. Using data from 1991 to 2012, there appears to be a strong, positive relationship between bank construction lending and private House price indexes Household formations residential construction put in place—see the chart. Of course, it's impossible to tell from this chart whether construction activity is responding to changes in Housing boom Housing crisis credit supply or credit supply is responding to changes in construction demand. However, banks have been extremely tight with credit in the aftermath of the Housing demand Housing prices financial crisis, and there aren't many signs that banks plan to change course any time soon. So it may be reasonable to assume that a continued reduction in Income segregation Individual Development Account bank C&D lending is likely to limit future gains in construction activity. Loan modifications Monetary policy Boston Fed's Christopher Foote and Paul Willen. Disclaimer Email Me Subscribe by E-mail Subscribe by RSS Other Fed Websites Comment Standards: Comments are moderated and will not appear until the moderator has approved them. Please submit appropriate comments. Inappropriate comments include content that is abusive, harassing, or threatening; obscene, vulgar, or profane; an attack of a personal nature; or overtly political. In addition, no off-topic remarks or spam is permitted. Mortgage crisis Mortgage default Mortgage interest tax deduction Mortgage supply Multifamily housing Negative equity Positive demand shock Positive externalities Rental homes Securitization Subprime MBS Subprime mortgages Supply elasticity Uncategorized Upward mobility Urban growth A case for optimism In conversations with banks of various sizes, two things are often repeated. First, bankers indicate there is little appetite for growth in C&D lending and second, banks of various sizes want to increase commercial and industrial lending (C&I). For many banks, a move from C&D lending to C&I lending is easier said than done—the skillsets needed for C&I lending differ from those associated with C&D. Acquiring C&I expertise is a challenge particularly for smaller banks. So what's a community bank going to do? An old adage is to do what you know best. For many community banks that would be C&D lending. Given the reports of lot shortages and house inventory being low, it would seem that profitable opportunities for C&D lending exist. There is nothing wrong with C&D loans appropriately underwritten and subject to reasonable risk management. A key question is when banks start moving back to C&D lending, will they be able to resist the shortcuts of the last cycle? Let's hope that banks can successfully navigate a return to C&D lending so that the housing market can continue to recover. By Carl Hudson, Director, Center for Real Estate Analytics in the Atlanta Fed's research department July 10, 2013 in Credit conditions, House price indexes, Housing boom | Permalink Frequently Asked Questions GDPNow Careers Contact Us Inflation Project Jobs Calculator Market Probability Tracker A to Z index Follow the Fed Publications Speakers Bureau Teacher Workshops Disclaimer & Terms of Use Online Privacy Policy Wage Growth Tracker Data Privacy Policy Home 1000 Peachtree Street N.E. Atlanta, Georgia 30309 404-498-8500 Careers
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