US home lending grows for 5 quarters in a row

September 4
8:23 AM 2015

At a time when the US construction sector is showing renewed activity, the rise in construction spending is boosting the US gross domestic product (GDP). At this juncture, home builders are upbeat on the prospects in the real estate and construction sectors as availability of loans is longer scarce.

The home lending continued to grow for fifth quarter continuously. Though, some demand, supply and other factors are still impacting the construction sector, the industry is coming out of the impact of financial crisis. 

Lenders are also coming forward though at moderate pace, to offer loans for the buyers in commercial and residential space. 

The Federal Deposit Insurance Corp has just released its study data on construction loans. The total outstanding balance of construction loans from FDIC-based institutions stood at $225.8billion during the second quarter showing a growth of 3.9 percent from the first quarter of 2015. 

The outstanding lending value was $201.5 billion in 2013. Single-to-four family units accounted for the most of the residential lending. The outstanding loan value for this segment stood at $56.1billion the second quarter rising 4.7 percent from the first quarter. 

Lenders are even offering loans on low down payment or even without down payment mortgages also. Considering the current low mortgage rates at four percent, US home and construction sectors are witnessing a robust growth. Despite scarce of homes supply, existing home sales rose to 5.59 million on annualized basis in July showing its highest since February 2007.

According to National Association of Realtors, the home sales grew two percent in July from June month. This is 10 percent growth from previous corresponding period in 2014, the association said. 
The low mortgage rates and easily available loans are enabling buyers to go for home buying. As a result, the buyers are outnumbering sellers before they can list homes on sale. 

The study also revealed that first-time buyers are more in number. 

National Association of Realtors also revealed that foreign nationals are buying homes in the US and this number is increasing. Foreign buyers accounted in the range of 7-10 percent of total buying activity in the US home and construction sector. 

However, the overall lending in the construction sector is still 59.5 percent below the peak level of $631.8billion recorded during early 2008. Lending to single to four-unit homes is also 70 recent less than the highest level of $186.3billion in early 2008 level. 

Considering the stability in the US construction sector and adverse conditions in the emerging economies, foreign nationals prefer to invest in the US construction sector for stable returns.

Of late, the construction sector is witnessing more number of lenders entering. The average number of home loans that banks review was up by in the range of 40-50 percent during the past one year.

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