With growing interest rates and strict lending conditions, the volume of loans for single-family homes and townhomes fell for the seventh straight quarter
As the volume of residential construction loans continues to drop, the number of homes being built could be affected.
Rising interest rates and a strict lending environment have led to a decline in loans for new-home construction. The total amount of acquisition, development, and construction (AD&C) loans from FDIC-insured banks dropped by 1.02% to $490.7 billion during Q4 2024, marking the third consecutive quarterly decrease. Loans for building single-family homes and townhomes have fallen for seven straight quarters, reaching their lowest level since 2021. During Q4 2024, loans for 1-4 family residential construction and land development totaled $89.5 billion, down 7.6% from the previous year and much lower than the $105 billion peak recorded in early 2023.
To end the year, a plurality of outstanding loans was held by smaller banking institutions, those with $1 billion-$10 billion in total assets, totaling $30.2 billion (33.7%). Banks with $10 billion- $250 billion in assets held the second largest share at $29.8 billion (33.3%), followed by the smallest banks with under $1 billion in assets, holding $20.7 billion (23.1%). The largest banks with over $250 billion in assets held the smallest amount at $8.8 billion (9.8%).
Notably, 56.9% of 1-4 family residential construction and development loans were held by banks with under $10 billion in assets to end 2024. Small community banks play a vital role ensuring financial and lending opportunities for builders across the United States. The data below shows the year-ending level of outstanding 1-4 family residential construction loans broken out by bank asset sizes.Read more
