A significant decrease in credit available to the residential construction segment may eventually impact the housing supply. Banks have cut lending for residential construction by more than 10%, from $102 billion a year ago to $92 billion at the end of the second quarter, according to an analysis in The Financial Times.
That represents the biggest credit crunch for homebuilders in more than a decade. Notably, construction lending has fallen for five consecutive quarters, according to data from the Federal Deposit Insurance Corp.
While slower lending hasn't impacted supply yet, housing starts are on track to fall 16% this year, according to the analysis. Weak demand and a slow housing market could be factors. Prices are more likely to remain high if construction credit and supply remain constrained.
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