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The Senior Loan Officer Survey
The Senior Loan Officer Survey is put out by the Federal Reserve every quarter. The Fed surveys up to 80 large domestic banks and 24 foreign banks. It conducts the survey quarterly, but it’s on a January, April, July, and October schedule in order to be available for the upcoming FOMC (Federal Open Market Committee) meetings. The survey questions cover changes in lending standards and the state of loan demand, both from consumers and businesses. Like most Fed surveys, often there are a couple of questions that address themes in the market.
Credit eased during the quarter, but it was primarily associated with commercial real estate and commercial or industrial lending. Consumer lending and mortgage lending standards eased, but only barely. The vast majority of banks reported no changes in standards. Here were the results.
Highlights of the Survey
Implications for homebuilders
The easing of standards for multifamily construction isn’t necessarily good news for builders, since they compete with multifamily rentals for households. That said, the easing for prime residential loans is good news for them.
During third quarter earnings, almost all CEOs reported tight credit as a constraint to their growth. Certainly homebuilders that focus on the lower price points like PulteGroup (PHM) and Beazer (BZH) reported drops in orders due to higher home prices and also credit difficulties among first-time homebuyers struggling with student loan debt. We have yet to hear from Toll Brothers (TOL), which concentrates on the luxury end of the market. Other homebuilders like Lennar (LEN) and KB Home (KBH) reported strong numbers, but they’re in attractive geographic and demographic segments.
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