Banks reversed course on commercial real estate lending over the summer, tightening standards on every type of property loan the Federal Reserve tracks after a quarter of easing, while borrowers pulled back from both commercial and residential mortgages. The findings come from the Fed’s October 2026 Senior Loan Officer Opinion Survey on Bank Lending Practices, published Nov. 2, 2026.
The survey, which asks loan officers how standards and demand changed over the prior three months, roughly the third quarter, drew responses from 61 domestic banks and 18 U.S. branches of foreign banks. Responses were due Oct. 5, more than three weeks before the Fed’s Oct. 28 policy meeting.
Commercial real estate loan standards: the numbers
The Fed’s summary says domestic banks “tightened, on net, lending standards for all commercial real estate (CRE) loan categories,” covering construction and land development, nonfarm nonresidential properties such as offices, stores and warehouses, and multifamily. The survey’s chart data puts numbers on it. The figures are net percentages: the share of banks reporting tighter standards minus the share reporting easier ones.
- Construction and land development: 15.5% net tightening, up from 3.7% net easing in the July survey.
- Nonfarm nonresidential: 8.8% net tightening, after 11.3% net easing in July.
- Multifamily: 8.8% net tightening, after 5.7% net easing in July.
That is a clear turn from three months ago, when RealtyWire reported that banks had eased CRE loan standards across all three categories. The construction reading is the highest net tightening for that category since the mid-2024 surveys, though well below the readings of roughly 65% to 74% banks reported throughout 2023.
Demand fell at the same time. Net shares of banks reporting stronger demand were negative 25.9% for construction and land development, negative 10.5% for nonfarm nonresidential and negative 22.8% for multifamily, the weakest readings for construction and multifamily demand since the first half of 2024. The Fed noted that foreign bank branches, by contrast, reported tighter standards but stronger CRE demand.
The survey’s summary does not list CRE-specific reasons for the tightening. For business loans, banks most often cited “a less favorable or more uncertain economic outlook and a worsening of industry-specific problems.”
Mortgage demand weakens across every category
On the residential side, standards barely moved. Banks reported leaving standards “basically unchanged” for most home-purchase loans, eased standards for qualified-mortgage (QM) jumbo and non-QM jumbo loans, and tightened standards for subprime mortgages, where a net 20% of respondents reported tighter terms.
Demand was another matter. The Fed said banks reported “weaker demand, on balance, across all residential real estate loan categories.” Net demand readings ranged from negative 25.5% for non-QM jumbo loans to negative 40% for subprime. For GSE-eligible loans, the conforming mortgages sold to Fannie Mae and Freddie Mac that make up the core of the market, the net reading was negative 32.1%, down from negative 11.8% in July and the weakest since the survey published in early 2024. Government-backed loans, a category that includes FHA and VA lending, came in at negative 30%.
Demand for home equity lines of credit was unchanged, and standards for those lines were also little changed.
The weaker mortgage readings match what other data have shown this fall, including Redfin’s report of pending sales at a record low. The survey measures demand at banks only, not at nonbank mortgage lenders, so it is a partial view of the market.
Lenders to lenders also get stricter
A special set of questions on loans to nondepository financial institutions, which include mortgage companies, found banks had tightened standards, on net, for every type of such loan, “including loans to mortgage credit intermediaries.” The most frequently cited reasons were a less favorable or more uncertain outlook and “a deterioration in the financial strength” of those borrowers. Demand from mortgage credit intermediaries was unchanged.
That matters for the housing market because independent mortgage companies typically fund loans on warehouse lines from banks before selling them to investors.
What it adds to the rate picture
The survey arrived days after the Federal Open Market Committee held its target range at 3.75% to 4% on Oct. 28 in a 10-2 vote, with Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack preferring a quarter-point increase. The FOMC statement said inflation “remains elevated.”
On our reading, the combination is a headwind for development. Developers seeking construction and land loans face both stricter bank standards and a central bank in which two voters wanted higher rates, a pairing that tends to push projects toward private lenders. Because responses were due by Oct. 5, the survey captures conditions before the late-October meeting, not reactions to it.
More lending coverage is on RealtyWire’s commercial real estate page.
