Banks continued in the third quarter to tighten lending standards for commercial real estate loans while leaving those for business loans largely unchanged, according to the U.S. Federal Reserve.

The Fed’s October survey of senior loan officers found a significant number of banks reported tightening standards for construction and land development loans, as well as loans secured by multifamily residential properties. A moderate majority of banks reported tightening standards for loans secured by nonresidential properties.

It was the fourth consecutive quarter to show a tightening of CRE lending standards.

A moderate net fraction of banks reported stronger demand for construction and land development loans, while demand for loans secured by multifamily residential and nonfarm nonresidential properties remained basically unchanged on net.

According to Seeking Alpha, the data indicate that “construction spending should continue to moderate in coming months and the tight credit conditions may signal a forthcoming construction recession. Whether or not the peak in construction activity that occurred in 2015 resulted in oversupply in the rentable space market, though, remains to be seen.”

Reported supply and demand for commercial real estate loans tends to lead construction spending by 12 to 18 months and completions by 24 to 36 months.

On the business loan side, U.S. banks reportedly left lending standards for large and middle-market firms and for small firms unchanged, on balance, in the third quarter. Those that tightened either standards or terms cited a less favorable or more uncertain economic outlook, less aggressive competition from other banks or nonbank lenders, and reduced tolerance for risk.

Respondents said that, over the next six months, they expect demand for C&I loans from large and middle-market firms as well as small firms to remain basically unchanged on net, though a moderate net fraction of foreign banks said their outlook for demand was somewhat stronger compared with current conditions.

Lending standards reportedly eased for on home mortgage loans eligible for purchase by Fannie Mae and Freddie Mac, loans categorized as QM jumbo and QM non-jumbo, and residential mortgages eligible for purchase by Fannie Mae and Freddie Mac.

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