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.
Third Quarter 2025 Summary
Credit conditions on loans for residential Land Acquisition, Development & Construction (AD&C) were still tightening in the third quarter of 2025, according to NAHB’s quarterly survey on AD&C Financing. This is in reasonably close agreement with the third quarter reading produced from the Federal Reserve’s survey of senior loan officers, marking fifteen consecutive quarters of tightening credit conditions reported by both builders and lenders.
According to the NAHB survey, the most common way lenders tightened in the third quarter was by lowering the maximum allowable loan-to-value or loan-to-cost ratio on the loans. Tied for second place were reducing the amount they are willing to lend, requiring out-of-pocket payment of interest or borrower funding of an interest reserve, and requiring personal guarantees.
Results on the cost of credit in the third quarter were mixed. The effective interest rate (which takes both the contract rate and initial points into account) increased from 9.95% to 10.15% on loans for land acquisition, but to decline from 11.77% to 10.92% on loans for land development and from 12.82% to 12.04% on loans for speculative single-family construction. The average effective rate on loans for pre-sold single-family construction remained essentially unchanged at 12.74%, compared to 12.73% in the second quarter.
Also in the NAHB AD&C survey, 37% of respondents who built single-family homes during the third quarter of 2025 reported financing some of the construction with a construction-to-permanent (one-time-close) loan made to the home buyer. On average, 63% of the homes these respondents built were financed this way.
