Senior Loan Officer Opinion Survey: Multifamily Lending Market Neutral Conditions

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The Federal Reserve’s latest Senior Loan Officer Opinion Survey contains the reported lending practices, as of the third quarter of 2019, of 80 large domestically chartered commercial banks and up to 24 large U.S. branches and agencies of foreign banks. The questions that comprise most of the survey are those relating to Commercial & Industrial (C&I) loans, Commercial Real Estate (CRE) loans, and residential real estate loans. For the C&I loan category, banks left their lending standards basically unchanged from the previous quarter, while the demand for such loans weakened. For the residential real estate category, on net, banks’ lending standards did not change in most loan categories, except for in subprime loans, for which around 12% more banks, on net, reported a tightening in lending standards. By contrast, the demand reported by banks for closed-ended, residential real estate lending increased from the previous quarter1.

The below figure shows a summary of what was reported in CRE loans pertaining to multifamily dwellings. As these loans are secured by “commercial real estate”, but are used for residential purposes, they generally refer to high-rise apartments with more than four units per building.

As of the end of the third quarter of 2019, 12% more banks reported tightening standards on commercial, multifamily lending, on net, than banks that reported loosening standards; additionally, 4% more banks reported weaker demand of commercial, multifamily loans, on net, than banks that reported a stronger demand for them. These survey results mirror the decline in multifamily housing starts as of the end of September.


Notes:

  1. The term “residential real estate lending”, as when used in the Senior Loan Officer Opinion Survey, excludes loans secured by multifamily residential properties, and thus can be thought to encompass the loans secured by all single-family dwellings and low-unit multifamily properties, the latter of which are usually 2-4 units.


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