There was some good news from the latest Federal Reserve’s Senior Loan Officer Opinion Survey (more frequently called SLOOS). Unfortunately, it wasn’t for commercial real estate lending.
During the fourth quarter of 2024, “modest net shares of banks” said they were tightening standards for construction financing, land development loans, and nonfarm nonresidential properties. Multifamily property loan standards largely remained the same.
Also, a modest net share of banks saw demand for construction and land development loans weaken. Overall, demand for other CRE loan types was unchanged, although things differed by bank size. A modest net number of large banks saw stronger demand for nonfarm nonresidential and multifamily financing. Demand in large banks was flat for construction and land development loans. Modest to moderate net shares of other size banks saw weaker demand across all CRE loan times.
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Looking at the details, 14.3% of large banks had tightened credit standards “somewhat” for new construction and land development loan applications. About 81% left things “basically unchanged,” and 4.8% eased them somewhat. Out of nonlarge banks, 4.8% tightened standards “considerably,” 9.5% tightened “somewhat,” 81% were unchanged, and 4.8% eased somewhat. The differences were in the distribution of tightening categories.
For nonfarm nonresidential properties and large banks, 9.5% tightened somewhat and 90.5% were unchanged. Among other banks, 12.2% tightened somewhat, 82.9% were unchanged, and 4.9% eased somewhat. For multifamily lending, among large banks, 9.5% tightened standards somewhat, 81% were unchanged, and 9.5% eased somewhat. Among other banks, 2.4% tightened considerably, 12.2% tightened somewhat, 75.6% were unchanged, and 9.8% eased somewhat.
For demand in construction and land development loans, 19% of land banks saw moderately stronger demand, 66.7% about the same, and 14.3% moderately weaker. About 14.3% of other banks saw moderately stronger demand, 59.5% about the same, 23.8% moderately weaker, and 2.4% substantially weaker.
About 19% of large banks saw moderately stronger demand for nonfarm nonresidential loans, 71.4% were the same, and 9.5% moderately weaker. Other banks, 9.8% saw moderately larger demand, 70.7% about the same, 17.1% moderately weaker, and 2.4% substantially weaker.
Demand for multifamily loans was moderately stronger for 19% of large banks, 71.4% about the same, and 9.5% moderately weaker. At other banks, it was 9.8% moderately stronger, 68.3% the same, 19.5% moderately weaker, and 2.4% substantially weaker.
Something to recognize is that the number of large banks in the survey seemed to be 23. That shouldn’t be a big issue because there is a relatively small number of them and the sample is a significant subset. However, the number of other banks was 41. Given the thousands of commercial banks in the U.S., that is a tiny portion, and results may be far from representative.
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