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 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.

Fourth Quarter 2022 Summary:

According to NAHB’s Survey on Acquisition, Development & Construction Financing, credit continued to become less available and generally more costly on loans for acquisition, development and construction (AD&C) in the fourth quarter of 2022.

In the fourth quarter of 2022, 146 builders responded to NAHB’s survey and reported that AD&C financing was less available and generally more costly than in the third quarter. The most common ways in which lenders tightened credit were to increase the interest rate on the loans (cited by 77 percent of the survey respondents who reported tighter credit conditions), reduce the amount they were willing to lend (67 percent) and lower the allowable Loan-to-Value or Loan-to-Cost ratio (60 percent).

• 2% reported credit for land acquisition had improved in the fourth quarter; 51% reported it had tightened. (Up from 43% reporting tightened credit from the second to the third quarter.)
• 2% reported credit for land development had improved in the fourth quarter; 46% reported it had tightened. (Up from 44% reporting tightened credit from the second to the third quarter.)
• 1% reported better credit for single-family new construction had improved in the fourth quarter; 38% reported it had tightened. (Up from 27% reporting tightened credit from the second to the third quarter.)

Interest Rates

The average effective interest 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 the third quarter on all four categories of loans tracked in the AD&C Survey.

• 7.97% to 10.14% on loans for land acquisition
• 9.67% to 10.41% on loans for land development
• 9.95% to 11.30% on loans for speculative single-family construction
• 10.76% to 10.85% on loans for pre-sold single-family construction

View the complete Q4 2022 findings.