Lending standards and demand for most types of residential mortgages were essentially1 in the first quarter of 2026, according to the recent release of the Senior Loan Officer Opinion Survey (SLOOS). For commercial real estate (CRE) loans, lending standards for multifamily construction & development were essentially unchanged as well. Compared to the previous quarter, demand for construction & development loans was weaker, while demand for multifamily loans was essentially unchanged.
The Federal Reserve has maintained its key short-term interest rate (i.e., Fed Funds) unchanged during the first three meetings of 2026. There has been growing division between FOMC participants on the appropriate trajectory of the Fed Funds rate that will satisfy their dual mandate of maximum employment and stable prices (i.e., inflation). Along with the arrival of a new Chair and the exogenous shocks to the global economy caused by the ongoing conflict in Iran, this has created a “wait-and-see” approach to monetary policy. As a result, NAHB does not forecast any changes to the Fed Funds rate until the end of the year.
Residential Mortgages
In the first quarter of 2026, three of seven residential mortgage loan categories: GSE-eligible, Qualified Mortgage (QM) non-jumbo non-GSE eligible, and Government saw a positive2 net easing index for lending conditions. An additional two (QM jumbo and non-QM jumbo) recording a neutral reading (i.e., 0). Subprime and non-QM non-jumbo loans continued to experience tighter lending conditions, as evidenced by a negative value, -6.3 and -2.0, respectively.
Four of the seven residential mortgage loan categories (GSE-eligible, QM Jumbo, non-QM jumbo, and Government) reported demand essentially unchanged in the first quarter of 2026. Two categories (non-QM non-jumbo and QM non-jumbo non-GSE eligible) experienced modestly weaker demand. However, the weakest demand continues to be for subprime loans, which has experienced weaker demand for 23 consecutive quarters.
Commercial Real Estate (CRE) Loans
For the CRE loan categories, multifamily registered a net easing index of 0.0, while the net easing index for construction & development loans was -4.8 in the first quarter of 2026. The Fed classifies changes between -5.0% and +5.0% as essentially unchanged.
The net percentage of banks reporting stronger demand was -11.7% for construction & development loans, with a negative number indicating weaker demand. This was a reversal for construction & development from last quarter, which saw stronger demand (+8.9%). For multifamily loans, demand was +3.3% in the first quarter of 2026, which is essentially unchanged according to the Fed’s classification scheme, as it has been for six consecutive quarters.
- The Federal Reserve uses the following descriptors when analyzing results from the survey which will be used, in principle, within this blog post as well:
– “Remained basically unchanged” means that the change or actual reading is greater than or equal to 0 and less than or equal to 5 percent.
– “Modest” means that the change or actual reading is greater than 5 and less than or equal to 10 percent.
– “Moderate” means that the change or actual reading is greater than 10 and less than or equal to 20 percent.
– “Significant” means that the change or actual reading is greater than 20 and less than or equal to 50 percent.
– “Major” means that the change or actual reading is greater than or equal to 50 percent.
- A value above zero (i.e., positive) indicates that lending conditions are easing while a value below zero (i.e., negative) indicates that lending conditions are tightening.