Magazine article American Banker

Fed Reports Fall in Mortgage Demand

Magazine article American Banker

Fed Reports Fall in Mortgage Demand

Article excerpt

Demand for mortgages dropped during the last six weeks, reflecting a further decline in home values, and business lending picked up modestly, the Federal Reserve Board said Wednesday.

The Fed's report on economic conditions, known as the Beige Book, said that more than half the 12 district Fed banks reported weak demand for mortgages and other types of household loans.

In New York, Chicago, San Francisco, the Kansas City region, and Richmond, Va., slow mortgage demand was paired with stricter underwriting. One in four New York bankers reported standards for mortgages tightening, and contacts in Richmond said demand for high-priced homes was softening. A Chicago banker called demand and mortgage spreads "as thin as I can remember."

In the Philadelphia district, bankers said home equity borrowers were "almost exclusively" seeking fixed-rate lines of credit, which had margins so low "there is little benefit to making the loans." Some bankers there said it was unlikely they would meet their lending projections for the year. Cleveland bankers said weak loan demand will probably extend into 2008. An exception was St. Louis, where loans to individuals rose 4.4%.

Though contacts in the Boston district noted a possible rebound in home prices, they said sales volume has fallen and the market remains "soft." In Minneapolis, contacts said residential home building in the Twin Cities had slowed from a year earlier. In the San Francisco district, contacts said the real estate slowdown had extended to areas previously thought to be still growing, such as parts of Utah and Idaho. …

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