Real estate loans’ performance
Residential real estate loans declined by 0.4% in April on a seasonally adjusted annualized basis. They increased by a meager 0.3% in May 2015. Revolving home equity loans have been declining—down by 4.2% in May 2015. Commercial real estate loans were up by 5.8% in May. The growth was 12.5% in March and 5.5% in April.
Overall real estate loan growth declined from 7.9% in March to 2% in April and 2.8% in May 2015. The total amount of residential real estate loans across all of the commercial banks stood at $2.05 trillion in the week ending June 3, 2015, while total real estate loans were $3.7 trillion. Residential real estate loans peaked at $2.2 trillion in 2009. They haven’t crossed that level since then.
Real estate loans’ market share
Residential real estate loans account for 24.9% of the total outstanding loans, while commercial real estate loans account for 20.3% of commercial banks’ total outstanding loans.
Speculations on rising interest rates have hurt the share prices of real estate sector stocks. They derive most of their revenue from rentals and apartment sales. As interest rates rise, mortgage rates also rise. This impacts the demand for housing and real estate loans. It also impacts refinancing activity.
Wells Fargo (WFC) leads in mortgages with a market share of 4.6% in commercial real estate and 3.5% in the Residential Loans segment. It was trading at $57.17 on June 17, 2015—up 4.14% YTD (year-to-date) and just 1% below consensus price estimates of $57.71.
Other leading banks, including JPMorgan Chase (JPM), Bank of America (BAC), U.S. Bancorp (USB), and BB&T (BBT) also have considerably big real estate loan portfolios. Together, the banks form 47.9% of the Financial Select Sector SPDR ETF (XLF).