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.

Third Quarter 2020 Summary:

While lenders continued to report credit tightening in the third quarter of 2020, builders and developers responding to NAHB&rsquo's Survey on Acquisition, Development and Construction Financing reported a near-neutral change in credit availability from the second quarter.

Among the respondents:

  • 17% reported credit for land acquisition had gotten better in the third quarter; 13% reported it had gotten worse
  • 20% reported credit for land development had improved in the third quarter; 20% reported it had gotten worse
  • 17% reported better credit conditions for new construction in the third quarter; 11% reported it had gotten worse

Builders and developers reporting worse credit conditions in the third quarter reported the following:

  • 35% said lenders simply were not making new loans (down from 52%)
  • 59% said lenders were pulling back because of coronavirus concerns (up from 52%)
  • 53% said lenders were lowering their LTV or LTC ratios (up from 48%)
  • 59% said lenders were reducing the amount they are willing to lend (up from 41%)

Declining Interest Rates

Also in the third quarter survey, builders and developers reported a reversal in the declining interest rates reported in the second quarter for all types of AD&C loans. 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) increased from:

  • 6.43% to 7.27% on loans for land acquisition
  • 6.61% to 7.83% on loans for land development
  • 7.64% to 8.76% on loans for speculative single-family construction
  • 7.16% to 9.25% on loans for pre-sold single-family construction

View the complete Q3 2020 findings.

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