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Monday, May 05, 2008

Fed: Lending Standards Tighten, Loan Demand Declines

by Calculated Risk on 5/05/2008 03:37:00 PM

From the Fed: The April 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices

In the April survey, domestic and foreign institutions reported having further tightened their lending standards and terms on a broad range of loan categories over the previous three months. The net fractions of domestic banks reporting tighter lending standards were close to, or above, historical highs for nearly all loan categories in the survey. Compared with the January survey, the net fractions of banks that tightened lending standards increased significantly for consumer and commercial and industrial (C&I) loans. Demand for bank loans from both businesses and households reportedly weakened further, on net, over the past three months, although by less than had been the case over the previous survey period.
emphasis added
CRE Loan Demand vs. Non-residential Investment StructuresClick on graph for larger image.

Of particular interest is the increase in tighter lending standards for Commercial Real Estate (CRE) loans. This graph compares investment in non-residential structure with the Fed's loan survey results for lending standards (inverted) and CRE loan demand.

Note that any reading below zero for loan demand means less demand than the previous quarter, but the good news is demand in April wasn't falling quite as fast as in January!

This is strong evidence of an imminent slump in CRE investment.

More charts here for residential mortgage, consumer loans and C&I.