As interest rates declined during the second half of 2019, the stock of outstanding residential construction loans declined during the final quarter of 2019. The volume of 1-4 unit residential construction loans made by FDIC-insured institutions declined 0.8%. The volume of loans fell by $615 million during the quarter, placing the total stock of loans at $79.7 billion.
On a year-over-year basis, the stock of residential construction loans is up just 1%, the lowest growth rate since the end of 2013. Since the first quarter of 2013, the stock of outstanding home building construction loans has nonetheless grown by 96%, an increase of almost $39 billion.
It is worth noting the FDIC data represent only the stock of loans, not changes in the underlying flows, so it is an imperfect data source.
Lending remains much reduced from years past. The current amount of existing residential AD&C loans now stands 61% lower than the peak level of residential construction lending of $204 billion reached during the first quarter of 2008.
The FDIC data reveal that the total decline from peak lending for home building construction loans continues to exceed that of other AD&C loans (nonresidential, land development, and multifamily). Such forms of AD&C lending are off a smaller 35% from peak lending. For the fourth quarter, these loans expanded by 3.8%.
As builder and developer lending has slowed, a gap remains between the current volume of home building demand and available credit. This lending gap is being made up with other sources of capital, including equity, investments from non-FDIC insured institutions and lending from other private sources, which may in some cases offer less favorable terms for home builders than traditional AD&C loans.