Residential Construction Loan Volume Increases

The volume of residential construction lending declined starting at the beginning of 2019, but it’s continued an upward trajectory through the first quarter of 2021. Last year wrapped up with a drop in residential construction loan volume as well because of fast sales growth, which reduced outstanding loans. For the first quarter of 2021, the volume of residential construction loans made for one to four unit projects advanced by 1.1% or $0.8 billion, according to the National Association of Home Builders.

This loan volume expansion placed the total stock of home building construction loans at $78.2 billion.

On a year-over-year basis, the stock of residential construction loans is down 4%, with quarterly loan declines in two of the last three quarters. Since the first quarter of 2013, the stock of outstanding home building construction loans has grown by 92%, an increase of almost $37.5 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 62% lower than the peak level of residential construction lending of $204 billion reached during the first quarter of 2008. Alternative sources of financing, including equity partners, have supplemented this capital market in recent years.

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