AD&C Financing Survey
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 improved, worsened 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.
Second Quarter 2025 Summary
For the fourteenth consecutive quarter, builders and developers reported tighter credit conditions on loans for residential Land Acquisition, Development & Construction (AD&C) in NAHB’s quarterly survey on AD&C Financing.
The NAHB survey’s net easing index for the second quarter of 2025 is in reasonably close agreement with the second quarter reading of the similar net easing index derived from the Federal Reserve’s survey of senior loan officers.
Like the NAHB net easing index, the one from the Fed has been in negative territory and indicating credit tightening for fourteen consecutive quarters. Over the past year, the additional tightening indicated by both indices has been relatively modest, although, after fourteen straight quarters of tightening, many builders are probably wondering how much room lenders have left to tighten further.
According to NAHB builders who reported tighter credit, the most common ways lenders tightened in the second quarter were by:
- reducing the amount they are willing to lend (cited by 60% of builders)
- requiring personal guarantees (53%)
- increasing the interest rate and not making new loans (47% each)
- increasing documentation requirements (40%)
In Q2 2025, 104 builders responded to NAHB’s survey and reported the following:
- The cost of credit declined on loans made specifically for residential land acquisition (the “A” in AD&C).
- The average effective interest rate (which takes both the contract rate and initial points into account) on land acquisition loans declined from 10.68% to 9.95%.
For the other three categories of AD&C loans tracked in the NAHB survey, credit became more expensive. The average effective interest rates increased in Q2 as follows:
- from 11.50% to 11.77% on loans for land development
- from 12.59% to 12.82% on loans for speculative single-family construction
- from 12.49% to 12.73% on loans for pre-sold single-family construction
