AD&C Financing Survey

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NAHB’s quarterly Survey on Acquisition, Development and Construction (AD&C) Financing asks builders and developers about whether the availability of AD&C credit has gotten better, worse or stayed the same since the previous quarter. The results are tracked within NAHB’s Net Tightening Index, which is constructed so that positive numbers indicate tightening of credit, with larger numbers indicating more widespread tightening.

2nd Quarter 2020 Summary:

Survey respondents indicated that credit continued to become tighter in the second quarter of 2020. The previous quarter marked the first time since 2012 that respondents reported tightening credit. Additionally, reversing a downward trend from the previous quarter, larger shares of builders and developers reported seeking AD&C loans.

Among the respondents:

  • 52% said lenders simply were not making new loans
  • 52% said lenders were pulling back because of coronavirus concerns
  • 48% said lenders were lowering their LTV or LTC ratios
  • 41% said lenders were reducing the amount they are willing to lend

Declining Interest Rates

Also in the second quarter of 2020, builders and developers reported declining interest rates on all types of AD&C loans covered in the NAHB survey. The average effective rate (based on rate of return to the lender over the assumed life of the loan taking both the contract interest rate and initial fee into account) declined from:

  • 6.84% to 6.43% on loans for land acquisition;
  • 7.95% to 6.61% on loans for land development;
  • 8.83% to 7.64% on loans for speculative single-family construction; and
  • 7.92% to 7.16% on loans for pre-sold single-family construction.

View the complete Q2 2020 findings.