Tightened Credit for Builders in Q2

During the second quarter of 2024, credit for residential Land Acquisition, Development & Construction (AD&C) continued to tighten and became even more expensive for most types of loans, according to NAHB’s survey on AD&C Financing. The survey was conducted in July and asked specifically about financing conditions in the second quarter, predating the release of some relatively weak economic data that has raised prospects for monetary policy easing.
The net easing index derived from the survey posted a reading of -33.7 in the second quarter. (The negative number indicates that credit was tighter than in the previous quarter.) The comparable net easing index based on the Federal Reserve’s survey of senior loan officers posted a similar result, with a reading of -23.8 — marking the 10th consecutive quarter of borrowers and lenders both reporting tightening credit conditions.
According to the NAHB survey, the majority (85%) of respondents noted that lenders were tightening in the second quarter by:
- Reducing the amount they are willing to lend, and
- Lowering the loan-to-value (or loan-to-cost) ratio.
Half of respondents also reported tightening by increasing documentation, increasing the interest rate, and requiring personal guarantees or other collateral unrelated to the project.
As credit becomes less available, it also tends to become more expensive. In the second quarter, the contract interest rate increased on all four categories of AD&C loans tracked in the NAHB survey:
- 8.40% in 2024 Q1 to 9.28% on loans for land acquisition,
- 8.07% to 9.05% on loans for land development,
- 8.24% to 8.98% on loans for speculative single-family construction, and
- 8.38% to 8.55% on loans for pre-sold single-family construction.
Paul Emrath, NAHB vice president for survey and housing policy, provides further insights in this Eye on Housing post.
Latest from NAHBNow
Jun 30, 2025
Top Builders List Spotlights NAHB MembersIn its latest May/June 2025 issue, Pro Builder unveiled its Top 200 (formerly Housing Giants) report, which ranks the top U.S. home builders by revenue, and looks at the top trends affecting the business of home building.
Jun 27, 2025
Supreme Court Limits Nationwide InjunctionsIn a case that could have far-reaching consequences for NAHB members, the Supreme Court today issued a 6-3 ruling that would limit the use of nationwide universal injunctions. A universal injunction stops the defendant from taking an action against anyone, anywhere.
Latest Economic News
Jun 30, 2025
2024 New Single-Family Starts by Census DivisionDespite persistently high mortgage rates, elevated financing costs for builders, and a shortage of buildable lots, single-family starts rebounded in 2024, following two straight years of declines.
Jun 27, 2025
2025 First Quarter State-Level GDP DataReal gross domestic product (GDP) increased in ten states in the first quarter of 2025 compared to the last quarter of 2024, according to the U.S. Bureau of Economic Analysis (BEA).
Jun 27, 2025
State and Local Property Tax Revenue Grows in the First QuarterIn the first quarter of 2025, state and local governments experienced an increase in property tax revenue growth. On a seasonally adjusted basis, state and local government property tax revenue grew 1.1% over the quarter, according to the Census Bureau’s quarterly summary of state and local tax revenue.