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A rise in housing permits could mean a swell in lending on Wall Street.

The number of new homes starting to be built in could be poised to grow.

If that happens, it’s good news for homebuilders and for the US consumer. But it’s even better news for Wall Street. 

Building permits soared last month and expected projects have homebuilder sentiment topping economists’ expectations.

Meanwhile, prospective minority homeowners have a much brighter outlook on home ownership than a year ago.

Overall, more Americans are ready to buy a home and Wells Fargo is expecting this year to be better for homes sales than 2014.

Plus, home prices in many areas are on the rise. 

Here’s the good news in chart form:

FRED data

FRED data

Housing permits rose sharply in the month of May, signaling good news about the US economy.

It’s a long way away from the homebuilding peak that preceded the financial crisis. But for big banks looking to regain a foothold as lenders, the rise in permits and the expected increase in sales would help boost revenue.

As the chart shows, housing permits in the US plunged in the wake of the financial crisis and never fully recovered. 

That’s because a healthy portion of the homes being built in the years leading up to the crash were being sold to borrowers that probably shouldn’t have been allowed to buy a home in the first place.  

Right now, many big banks on Wall Street are ramping up consumer lending operations. For the first time, even Goldman Sachs is getting into the game. More banks are expected to ramp up activity in the lending arena. This means that Wells Fargo could again see the same banks that abandoned home loan operations rushing to get back into the game. 

Banks’ strategy shift comes as economists have largely moved to September 2015 their predictions for a Federal Reserve rate hike.

And, once that happens, money starts getting more costly for borrowers. It will benefit the banks in the short-run. Sure, consumer credit may tighten a little and borrowers with higher credit scores will be squeezed for a few more points on a loan. With unemployment in the US back to pre-crisis lows, many on Wall Street think that leading indicators like housing permits and home starts won’t be severely impacted. But this is wholly predicated on the Federal Reserve’s rate-raising plan moves in baby steps, and not leaps and bounds. 

A lending environment like that will play right into Wall Street’s hands (and, its pocketbook). It could help more Americans realize the so-called dream of home ownership. But let’s hope this time around everyone manages borrower credit quality a lot better than they did a decade ago.

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