Homebuilders are Right: The Construction Game is Looking Good

Andrew Sohr
PUBLISHED: 03/22/2018

As we head into 2018, the Built team is more excited than ever to be in the construction industry. When we started Built three years ago, we could not have predicted the way the real estate and construction markets would continue to expand across nearly every market in the country.

We aren’t the only ones excited about this trend, either. Homebuilder sentiment is near the highest level this century, and continues to signal that housing demand should continue to grow this year. Of note, outlook looks especially strong over the next six months, where builders showed the highest degree of confidence.

Construction loan growth also continues to be on a tear. With loan volume growing 1.6% in the fourth quarter of 2017, we’ve now seen 19 consecutive quarters of loan growth. More lenders are entering the construction game or adding to their loan portfolios.

What’s feeding this trend? Housing supply can’t keep up with demand. (We cover that in our 2018 construction and real estate outlook.) Easing credit conditions and new lenders adding money to the market have helped with growth as well.

The thing is, there is still room to grow.

Total construction lending remains far off from its peak in 2008. Residential construction loans are still 64% off their peak levels, while nonresidential and multifamily are down about 39%. We’ve discussed it before — forward-thinking lenders are ramping up construction lending programs or starting them for the first time. Even with new money entering the game, there is still room to grow. We believe the biggest headwind for the real estate market might be a lack of inventory. New construction is paramount for the health of the housing industry in the next few years.

If you’re stuck at your current lending levels because you can’t seem to crack the efficiency code, we can help. Construction lending doesn’t have to be time-consuming, risky, or expensive. The right technology can make loan administration painless for everyone involved.