Homebuilders were a little more confident in June than they were in May, according to the National Association of Home Builders.

It says a big reason homebuilders are upbeat is because there’s still a lot of demand for what they do, given that there aren’t a lot of homes on the market right now.

But homebuilders still face a number of challenges. One of those challenges is getting a loan.

Homebuilders have been on a wild ride since the early days of the pandemic. Back then, they had a lot of trouble getting building materials because of the congested supply chain. They had a hard time finding workers because of the tight labor market.

And getting a loan was the least of their concerns.

“You had interest rates that were lower, you had, gosh, you had rent growth that was just exploding across the market,” said John Kirk, managing director of Embrey, an apartment construction company based in San Antonio.

As a result, he said, banks felt safe lending to builders. But about a year ago, Kirk said, things started to change.

“You have interest rates that are rising — they rose so quick,” he said. “You have rent growth. You know, it went from 10% one quarter down to 3% next quarter. So it trailed off really fast.”

As a result, construction loans suddenly looked riskier. And lenders got more cautious.

The bank failures that happened earlier this year made lenders even more nervous, said Odeta Kushi, deputy chief economist at First American. Especially after customers at some banks pulled out their deposits.

“As long as the fear of deposit flight keeps banks sort of on the conservative side of risk management, we might see this tightening of lending standards for construction loans,” Kushi said.

She said there’s still plenty of demand for new housing, especially since rising mortgage rates have kept a lot of existing homes off the market.

But Kushi said the lending slowdown could start to make homebuilders pull back.

“The way that we would see that is a slower new-project pipeline,” she said. “So maybe less groundbreaking on new homes than would have otherwise occurred if we were in a normal lending environment.”

That’s already starting to happen with urban developments, Kirk said. That’s because high rises with hundreds of units are expensive to build, so they require a lot of borrowing.

“They’re just not getting done, just because of the total capitalization of how big they are,” Kirk said.

He said that means housing supply could fall further in two or three years, when those buildings would have otherwise come onto the market.