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Mostly Unchanged Demand, Lending Conditions for Residential Mortgages in First Quarter – Eye

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Lending standards and demand for most types of residential mortgages were essentially in the first quarter of 2026, according to the recent release of the Senior Loan Officer Opinion Survey (SLOOS). For commercial real estate (CRE) loans, lending standards for multifamily construction & development were essentially unchanged as well. Compared to the previous quarter, demand for construction & development loans was weaker, while demand for multifamily loans was essentially unchanged. 

The Federal Reserve has maintained its key short-term interest rate (i.e., Fed Funds) unchanged during the first three meetings of 2026. There has been growing division between FOMC participants on the appropriate trajectory of the Fed Funds rate that will satisfy their dual mandate of maximum employment and stable prices (i.e., inflation). Along with the arrival of a new Chair and the exogenous shocks to the global economy caused by the ongoing conflict in Iran, this has created a “wait-and-see” approach to monetary policy. As a result, NAHB does not forecast any changes to the Fed Funds rate until the end of the year.

Residential Mortgages

In the first quarter of 2026, three of seven residential mortgage loan categories: GSE-eligible, Qualified Mortgage (QM) non-jumbo non-GSE eligible, and Government saw a positive net easing index for lending conditions. An additional two (QM jumbo and non-QM jumbo) recording a neutral reading (i.e., 0). Subprime and non-QM non-jumbo loans continued to experience tighter lending conditions, as evidenced by a negative value, -6.3 and -2.0, respectively.

Four of the seven residential mortgage loan categories (GSE-eligible, QM Jumbo, non-QM jumbo, and Government) reported demand essentially unchanged in the first quarter of 2026. Two categories (non-QM non-jumbo and QM non-jumbo non-GSE eligible) experienced modestly weaker demand. However, the weakest demand continues to be for subprime loans, which has experienced weaker demand for 23 consecutive quarters.

Commercial Real Estate (CRE) Loans

For the CRE loan categories, multifamily registered a net easing index of 0.0, while the net easing index for construction & development loans was -4.8 in the first quarter of 2026. The Fed classifies changes between -5.0% and +5.0% as essentially unchanged.

The net percentage of banks reporting stronger demand was -11.7% for construction & development loans, with a negative number indicating weaker demand. This was a reversal for construction & development from last quarter, which saw stronger demand (+8.9%). For multifamily loans, demand was +3.3% in the first quarter of 2026, which is essentially unchanged according to the Fed’s classification scheme,  as it has been for six consecutive quarters.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Flat Conditions for Open Construction Jobs – Eye On Housing

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The number of open positions in construction in January was flat year-over-year, per the Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS). The current level of open jobs is down measurably from three years ago due to declines in construction activity, particularly in housing. However, recent gains for nonresidential construction combined with soft conditions for housing have left the number of job openings in construction flat.

The number of open jobs for the overall economy increased in January, rising from 5.83 million in December to 6.20 million in January. The January reading was down from a year ago (6.55 million) due to a slowing labor market.

Previous NAHB analysis indicated that this number had to fall below eight million on a sustained basis for the Federal Reserve to move forward on interest rate reductions. With estimates remaining below eight million for national job openings, the Fed, in theory, should be able to cut further.

The number of open construction sector jobs was relatively flat, declining slightly from 245,000 in December to 231,000 in January. This total was flat compared to a year ago (232,000). The chart below notes the declining trend that has been in place for unfilled construction jobs since the Fed raised the federal funds rate and home building weakened. While home building employment was declining during the second half of 2025, other subsectors of the construction industry have expanded (e.g. data centers).

The construction job openings rate decreased to 2.7% in January, equal to the 2.7% rate estimated a year ago.

The layoff rate in construction declined to 1.0% in January. The quits rate decreased to 1.7% for the month.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Weaker Conditions for Single-Family Built-for-Rent Housing – Eye On Housing

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Single-family built-for-rent (or built-to-rent, BTR) construction fell back in the fourth quarter of 2025, as a higher cost of financing and increased multifamily supply crowded out development.

Housing legislation now under final consideration in Congress would also weaken the sector. The legislation, as approved by the Senate, would require institutionally financed new-construction single-family rental housing to be sold to individual home buyers within seven years. This requirement would decrease investable capital and lower housing supply. A preliminary NAHB estimate indicates the proposed rule places approximately 40,000 units per year at-risk.

According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 15,000 single-family built-for-rent (SFBFR) starts during the fourth quarter of 2025. This is down slightly from the fourth quarter of 2024 (16,000 starts).

Over the course of 2025, 68,000 such homes began construction, which is a 19% decrease compared to the 84,000 estimated SFBFR starts in 2024.

The SFBFR market is a source of inventory amid challenges regarding housing affordability and down payment requirements in the for-sale market, particularly during a period when a growing number of people want more space and a single-family structure. Single-family built-for-rent construction differs in structural characteristics compared to other newly-built single-family homes, particularly with respect to home size. However, investor demand for single-family homes, both existing and new, has cooled with higher interest rates.

Given the relatively small size of this market segment, the quarter-to-quarter movements typically are not statistically significant. The current four-quarter moving average of market share (7%) is nonetheless higher than the historical average of 2.7% (1992-2012).

Importantly, as measured for this analysis, the estimates noted above include only homes built and held by the builder for rental purposes. The estimates exclude homes that are sold to another party for rental purposes, which NAHB estimates may represent another three to five percent of single-family starts based on industry surveys.

The Census data note an elevated share of single-family homes built as condos (non-fee simple), with this share averaging about 4% over recent quarters. Some, but certainly not all, of these homes will be used for rental purposes. Additionally, it is theoretically possible that some single-family built-for-rent units are being counted in multifamily starts, as a form of “horizontal multifamily,” given that these units are often built on a single plat of land. However, spot checks by NAHB with permitting offices indicate no evidence of this data issue occurring (the condo element identifies another difficulty with respect to the 7-year sale requirement of the proposed legislation in Congress).

With the onset of the Great Recession and declines in the homeownership rate, the share of built-for-rent homes increased in the years after the recession. While the market share of SFBFR homes is small, it has clearly expanded. Given affordability challenges in the for-sale market, the SFBFR market will likely retain an elevated market share. However, in the near term, SFBFR construction is likely to slow given market and policy headwinds.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Flat Conditions for Townhouse Construction – Eye On Housing

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Final data for 2025 reveal relatively flat conditions for townhouse construction volume in a year that saw broad-based declines for single-family home building.

Townhouse construction ended 2025 with a soft quarter. According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the fourth quarter of 2025, single-family attached starts totaled 38,000. Despite recent gains, this was the weakest quarter for the sector since the start of 2023.

Over the course of 2025, townhouse construction starts totaled 173,000 homes, effectively flat compared to 2024 (174,000). Townhouses made up more than 17% of all of single-family housing starts for the fourth quarter of the year.

Using a one-year moving average, the market share of newly-built townhouses stood at 18.4% of all single-family starts for the third quarter. In the third quarter of 2025, the four-quarter moving average market share was the highest on record for data going back to 1985.

Prior to the current cycle, the peak market share of the last two decades for townhouse construction was set during the first quarter of 2008, when the percentage reached 14.6% on a one-year moving average basis. This high point was set after a fairly consistent increase in the share beginning in the early 1990s.

The long-run prospects for townhouse construction are positive given growing numbers of homebuyers looking for medium-density residential neighborhoods, such as urban villages that offer walkable environments and other amenities. Where it can be zoned, it can be built.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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How Housing Affordability Conditions Vary Across States and Metro Areas – Eye On Housing

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The NAHB 2026 priced-out estimates show that the housing affordability challenge is widespread across the country. In 39 states and the District of Columbia, over 65% of households are priced out of the median-priced new home market. This indicates a significant disconnect between higher new home prices, elevated mortgage rates, and household incomes.

New Hampshire stands out as the state with the highest share of households (83.4%) unable to afford the state’s median new home price of $677,982. High-cost states such as Hawaii and Maine follow closely, with 83% and 82.7% of households, respectively, struggling to afford new homes.

Even in states with relatively lower median new home prices, affordability remains a major concern. For example, in Mississippi, where the median home price is $266,837, 61.1% of households still find these new homes out of reach. Meanwhile, Delaware, the state with better affordability in the analysis, has a median new home price of $373,666, and even there, around 56% of households still struggle to afford a new home. Even modest price increases, such as an additional $1,000, could push thousands more households from affording these median priced new homes. For instance, in Texas, such an increase could price out over 14,365 households.

Affordability patterns also vary significantly across metropolitan areas. In high-cost areas like the San Jose-Sunnyvale-Santa Clara, CA metro area, where new homes largely target high-income Silicon Valley residents, only 14% of all households meet the minimum income threshold of $407,659 required to qualify for a loan on a median-priced new home. In contrast, in more affordable metro areas like Rome, GA, where the median new home price is $107,567, more than three-quarters of households can afford a median-priced new home. While higher home prices generally result in higher monthly mortgage payments and higher income thresholds, the relationship between home prices and affordability is not always linear. Factors like property taxes and insurance payments can also significantly impact monthly housing costs, adding complexity to affordability calculations.

The affordability of new homes, together with the population size of a metro area, significantly influences the priced-out impact of a $1,000 increase in new home prices. In metro areas where new homes are already unaffordable to most households, the effect of such an increase tends to be small. For instance, in the San Jose-Sunnyvale-Santa Clara, CA metro area, an additional $1,000 increase to the home price affects only 273 households, as only 14% of all households could afford such expensive new homes in the first place. Here, the additional price increase only affects a narrow share of high-income households at the upper end of the income distribution, where affordability is already stretched.

In contrast, metro areas, where new homes are more broadly affordable, experience a larger priced-out effect. A $1,000 increase in the median new home price affects a larger share of households in the “thicker part” of the income distribution. For example, in the New York-Newark-Jersey City, NY-NJ Metro Area metro area, a $1,000 increase in new home price would disqualify 4,028 households from affording a median-priced new home. This is the largest priced-out effect among all metro areas, driven by a substantial population base.

Detailed priced-out estimates for every state and more than 300 metro areas are available in the interactive dashboard below.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Weaker Demand, Unchanged Lending Conditions for Residential Mortgages in Fourth Quarter –

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Lending standards for most types of residential mortgages were essentially unchanged but overall demand was weaker in the fourth quarter of 2025, according to the recent release of the Senior Loan Officer Opinion Survey (SLOOS). However, for commercial real estate (CRE) loans, lending standards for multifamily were looser, while standards for construction & development were essentially unchanged. Demand for construction & development loans was stronger, while demand for multifamily loans was essentially unchanged for the quarter. 

After three consecutive 25 basis point cuts to finish 2025, the Federal Reserve decided to maintain its key short-term interest rate (i.e., Federal Funds) unchanged during its first meeting of 2026. Participants on the Federal Open Market Committee (FOMC) continue to assess how to weigh the components of its dual mandate, as inflation continues to be above the stated target of 2% (i.e., the case for higher rates) while the economy is experiencing further deceleration in job growth (i.e., the case for lower rates). Given the current macroeconomic landscape and a change in leadership at the Fed as Jerome Powell’s term as Chair ends in May, NAHB anticipates that any further rate cuts will occur in the latter half of this year.

Residential Mortgages

In the fourth quarter of 2025, three of seven residential mortgage loan categories; GSE-eligible, Qualified Mortgage (QM) non-jumbo non-GSE eligible, and Government, saw a positive net easing index for lending conditions with an additional two (non-QM non-jumbo and QM jumbo) recording a neutral reading (i.e., 0). Subprime and non-QM jumbo loans experienced tighter lending conditions, as evidenced by a negative value, -8.3 and -4.2 respectively.

All seven residential mortgage loan categories reported weaker demand in the fourth quarter of 2025, with the weakest demand coming from subprime loans. This category has experienced weaker demand for 22 consecutive quarters.

Commercial Real Estate (CRE) Loans

For the CRE loan categories, multifamily registered a net easing index of +5.5 for the fourth quarter of 2025, indicating looser credit conditions for the first time since Q1 2022. As a reminder, this was when the Federal Reserve began their aggressive rate hiking path, which saw the Federal Funds rate increase by 525 basis points over a year and a half period. For construction & development loans, the net easing index was -1.8, or essentially unchanged.

The net percentage of banks reporting stronger demand was 8.9% for construction & development loans, with a positive number indicating stronger demand. This is the first time construction & development has been positive since Q4 2021. For multifamily loans, demand was -1.9% in the fourth quarter of 2025, which is essentially unchanged according to the Fed’s classification scheme (i.e., between -5.0% and +5.0%).



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Soft Conditions for Single-Family Built-for-Rent – Eye On Housing

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Single-family built-for-rent construction fell back in the third quarter of 2025, as a higher cost of financing and increased multifamily supply crowded out development.

According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 18,000 single-family built-for-rent (SFBFR) starts during the third quarter of 2025. This is down significantly relative to the third quarter of 2024 (24,000 starts). Over the last four quarters, 69,000 such homes began construction, which is a 25% decrease compared to the 92,000 estimated SFBFR starts in the four quarters prior to that period.

The SFBFR market is a source of inventory amid challenges over housing affordability and downpayment requirements in the for-sale market, particularly during a period when a growing number of people want more space and a single-family structure. Single-family built-for-rent construction differs in terms of structural characteristics compared to other newly-built single-family homes, particularly with respect to home size. However, investor demand for single-family homes, both existing and new, has cooled with higher interest rates.

Given the relatively small size of this market segment, the quarter-to-quarter movements typically are not statistically significant. The current four-quarter moving average of market share (7%) is nonetheless higher than the historical average of 2.7% (1992-2012).

Importantly, as measured for this analysis, the estimates noted above include only homes built and held by the builder for rental purposes. The estimates exclude homes that are sold to another party for rental purposes, which NAHB estimates may represent another three to five percent of single-family starts based on industry surveys.

The Census data notes an elevated share of single-family homes built as condos (non-fee simple), with this share averaging more than 4% over recent quarters. Some, but certainly not all, of these homes will be used for rental purposes. Additionally, it is theoretically possible some single-family built-for-rent units are being counted in multifamily starts, as a form of “horizontal multifamily,” given these units are often built on a single plat of land. However, spot checks by NAHB with permitting offices indicate no evidence of this data issue occurring.

With the onset of the Great Recession and declines for the homeownership rate, the share of built-for-rent homes increased in the years after the recession. While the market share of SFBFR homes is small, it has clearly expanded. Given affordability challenges in the for-sale market, the SFBFR market will likely retain an elevated market share. However, in the near-term, SFBFR construction is likely to slow until the return on new deals improves.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Credit Conditions for Builders Continue to Be Tight – Eye On Housing

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Credit conditions on loans for residential Land Acquisition, Development & Construction (AD&C) were still tightening in the third quarter of 2025, according to NAHB’s quarterly survey on AD&C Financing.  The net easing index derived from the survey posted a reading of -11.0 (the negative number indicating that credit tightened since the previous quarter). This is in reasonably close agreement with the third quarter reading of -6.6 for the similar net easing index produced from the Federal Reserve’s survey of senior loan officers—marking fifteen consecutive quarters of tightening credit conditions reported by both builders and lenders.

More details from the Fed’s survey of lenders—including measures of demand and net easing for residential mortgages—appeared in a previous post.

According to the NAHB survey, the most common way lenders tightened in the third quarter was by lowering the maximum allowable loan-to-value or loan-to-cost ratio on the loans (cited by 60% of the builders and developers who reported tighter credit). Tied for second place were reducing the amount they are willing to lend, requiring out-of-pocket payment of interest or borrower funding of an interest reserve, and  requiring personal guarantees (cited by 47% each).

Results on the cost of credit in the third quarter were mixed. The average contract rate increased from 7.82% to 7.95% on loans specifically for residential land acquisition—but declined on the other three categories of loans tracked in NAHB’s AD&C survey: from 8.04% to 7.68% on loans for land development, from 8.17% to 7.90% on loans for speculative single-family construction, and from 7.95% to 7.90% on loans for pre-sold single-family construction.   

Meanwhile, the average initial points charged on the loans increased across the board: from 0.56% to 0.66% on loans for land acquisition, from 0.74% to 0.83% on loans for land development, from 0.72% to 0.74% on loans for speculative single-family construction, and from 0.58% to 0.67% on loans for pre-sold single-family construction.

Those combinations of quarter-to-quarter changes caused the effective interest rate (which takes both the contract rate and initial points into account) to increase from 9.95% to 10.15% on loans for land acquisition, but to decline from 11.77% to 10.92% on loans for land development and from 12.82% to 12.04% on loans for speculative single-family construction. The average effective rate on loans for pre-sold single-family construction remained essentially unchanged at 12.74%, compared to 12.73% in the second quarter.

Although results on the average effective interest rate were mixed on a quarter-to-quarter basis, the  rate on each of the four types of AD&C loans has declined significantly since peaking somewhere in the period between 2023 Q3 and 2024 Q2.

Also in the NAHB AD&C survey, 37% of respondents who built single-family homes during the third quarter of 2025 reported financing some of the construction with a construction-to-permanent (one-time-close) loan made to the ultimate home buyer. On average, 63% of the homes these respondents built were financed this way.

More detail on credit conditions for residential builders and developers is available on NAHB’s AD&C Financing Survey web page.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Unchanged Lending Conditions for Residential Mortgages in Third Quarter – Eye On Housing

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Lending standards for most types of residential mortgages were essentially unchanged, according to the recent release of the Senior Loan Officer Opinion Survey (SLOOS). For commercial real estate (CRE) loans, lending standards for construction & development were modestly tighter, while multifamily was essentially unchanged.  Demand for both CRE categories was essentially unchanged for the quarter. 

Two weeks ago, the Federal Reserve eased its key short-term interest rate (i.e., Federal Funds) by 25 basis points for the second consecutive meeting, establishing an upper bound of 4.00%.  While the causal link between the Federal Funds rate and the 30-year fixed rate mortgage is minimal, these cuts will have a more tangible impact for private home builders through lower rates on acquisition, development, & construction (AD&C) loans.  Roughly 60% of single-family starts are built by private builders. With pressure from both sides of their dual mandate as the job market cools and inflation remains sticky, NAHB is forecasting a measured approach from the Fed when it comes to further rate cuts next year.

Residential Mortgages

In the third quarter of 2025, four of seven residential mortgage loan categories saw a positive net easing index for lending conditions with an additional two recording a neutral reading (i.e., 0).  Only subprime loans experienced tighter lending conditions, as evidenced by a negative value (-6.3).  Nevertheless, based on the Federal Reserve classification of any reading between -5.0 and +5.0 as “essentially unchanged,” all but subprime fell within this range.

Five of the seven residential mortgage loan categories reported stronger demand in the third quarter of 2025, with the strongest demand coming from Government, GSE-eligible, and Qualified Mortgage (QM) non-jumbo, non-GSE eligible loans.  Non-QM jumbo was essentially unchanged for the quarter, while subprime loans were the only category to experience weaker demand, which has been the case since Q3 of 2020.

Commercial Real Estate (CRE) Loans

For the CRE loan categories, construction & development loans registered a net easing index of -6.6 for the third quarter of 2025, indicating modestly tighter credit conditions.  For multifamily loans, the net easing index was -1.6, or essentially unchanged.  Both categories of CRE loans show tightening of lending conditions (i.e., net easing indexes below zero) since Q2 2022.  However, the tightening has become less defined recently for multifamily, with its net easing index essentially unchanged (i.e., between -5.0 and +5.0) for four consecutive quarters.

The net percentage of banks reporting stronger demand was -4.9% for construction & development loans, with a negative number indicating weaker demand.  For multifamily, demand was neutral (i.e., 0) in the third quarter of 2025, with the same number of banks that reported weaker demand as those who reported stronger demand.  However, demand for CRE loans within both categories has experienced unchanged conditions (i.e., between -5.0% and +5.0%).



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Credit Conditions for Builders Tighten

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For the fourteenth consecutive quarter, builders and developers reported tighter credit conditions on loans for residential Land Acquisition, Development & Construction (AD&C) in NAHB’s quarterly survey on AD&C Financing.  

In the second quarter of 2025, the NAHB survey’s net easing index posted a reading of -12.3 (the negative number indicating that credit tightened since the previous quarter).  This is in reasonably close agreement with the second quarter reading of -9.7 for the similar net easing index derived from the Federal Reserve’s survey of senior loan officers.  Like the NAHB net easing index, the one from the Fed has been in negative territory (indicating credit tightening) for fourteen consecutive quarters.  Over the past year the additional tightening indicated by both indices has been relatively modest, with index levels hovering between -20 and 0.  Modest or not, however, after fourteen straight quarters of tightening, many builders are probably wondering how much room lenders have left to tighten further.    

More details from the Fed’s survey of lenders—including measures of demand and net easing for residential mortgages—appeared in a previous post.

According to NAHB builders, the most common ways lenders tightened credit on AD&C loans in the second quarter were by reducing the amount they are willing to lend (cited by 60% of the builders who reported tighter credit), requiring personal guarantees (53%), increasing the interest rate and not making new loans (47% each), and increasing documentation requirements (40%). 

Also in the second quarter, the cost of credit declined on loans made specifically for residential land acquisition (the “A” in AD&C).  The average contract interest rate on the loans declined from 8.23% to 7.82%, while the average initial points dropped from 0.71% to 0.56%.  As a result, the average effective interest rate (which takes both the contract rate and initial points into account) on land acquisition loans declined from 10.68% to 9.95%.

For the other three categories of AD&C loans tracked in the NAHB survey, credit became more expensive since the previous quarter.  The average contract interest rate increased on loans for land development (from 7.86% to 8.04%) and speculative single-family construction (from 8.08% to 8.17%), while declining only slightly (from 7.96% to 7.95%) on loans for pre-sold single-family construction.  Meanwhile, average initial points were unchanged at 0.74% on loans for land development, but increased from 0.68% to 0.72% on loans for speculative single-family construction, and from 0.45% to 0.58% on loans for pre-sold single-family construction.

Those combinations of quarter-to-quarter changes took the effective interest up from 11.50% to 11.77%  on loans for land development, from 12.59% to 12.82% on loans for speculative single-family construction, and from 12.49% to 12.73% on loans for pre-sold single-family construction.

Although the average effective interest rate was higher in 2025 Q2 than in 2025 Q1 for three of the four categories of AD&C loans, the rate was down year-over-year for all four. 

Financing costs for builders and developers could decline further over the next quarter, especially if (as NAHB expects) the Federal Reserve reduces the target federal funds rate at its September meeting.  In fact, as discussed in NAHB’s post on the Fed’s July meeting, a reduction in construction financing costs rather than an effect on mortgage rates is the main benefit builders can expect from easier monetary policy.

More detail on credit conditions for residential builders and developers is available on NAHB’s AD&C Financing Survey web page.

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