Tight mortgage lending standards continue to affect sales for single-family builders across the nation, according to a survey released by the National Association of Home Builders (NAHB). More than half of the single-family builders surveyed indicated that lending standards were “tight” or “very tight,” while only 11 percent indicated that standards were “somewhat easy” and no builders described them as “very easy.”
“While housing has seen some positive growth throughout the year, there is no denying that tight credit conditions are hindering a full, healthy housing recovery,” NAHB Chief Economist David Crowe said. “These persistently tight mortgage credit standards continue to limit the number of creditworthy borrowers, particularly younger families and first-time home buyers, from entering the housing market.”
The survey also asked builders whether they had lost any sales over the last six months because buyers could not qualify for a mortgage. Eighty-three percent answered “yes,” and of these, the average share of sales lost was 9.7 percent. NAHB estimates that this 9.7 percent translates to 18,700 new-home sales lost because buyers were unable to qualify for mortgages.
“NAHB advocates for prudent lending standards, but we’ve seen banks and regulators swing the pendulum too far and create an environment where lending standards are too restrictive,” NAHB Chairman Kevin Kelly said. “We want a return to reasonable lending standards where qualified borrowers are able to obtain a mortgage and create the American dream for themselves.”
NAHB has supported many housing finance reform policies that would help reverse tight lending conditions, it said in a release announcing the survey, including:
- Improved credit scoring models
- A reduction of guarantee fees – known as g-fees
- Passage of the Housing Finance Reform and Taxpayer Protection Act of 2014 (Johnson-Crapo)
- Having FHA and FHFA continue and expand their efforts to reduce lender concern over mortgage insurance denials and forced loan buybacks
A tight lending market for potential homebuyers is just one of the headwinds impacting the housing recovery today. Builders also report that rising costs for building materials and shortages of finished lots and labor are problems they are facing.