AD&C Financing Survey

Indices
Published

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.

First Quarter 2025 Summary

Respondents to NAHB’s Survey on Acquisition, Development & Construction (AD&C) Financing reported that lending standards on AD&C loans tightened modestly from the fourth quarter of 2024 to the first quarter of 2025, although reports of tightening were less widespread than they have been at any other time over the past three years. However, the cost of credit for AD&C eased in the first quarter of 2025 in three out of four categories of AD&C loans tracked by the survey. In the first quarter of 2025, builders and developers noted the average contract interest rate declined on loans for land acquisition, land development, and speculative single-family construction.

The No. 1 way survey respondents say lenders tightened credit conditions in the first quarter of 2025 was raising interest rates as opposed to lowering the loan-to-value or loan-to-cost, which topped the survey’s list in the fourth quarter of 2024. Of the survey respondents who reported tightening credit conditions:

  • 57% reported tightening due to higher interest rates;
  • 50% cited lower loan-to-value or loan-to-cost ratio;
  • 43% reported increased documentation;
  • 43% reported lenders requiring personal guarantees or collateral not related to the project; and
  • 36% said lenders reduced the amount they were willing to lend (the lowest percentage for this reason for tightening since 2018).

In Q1 2025, 118 builders responded to NAHB’s survey and reported the following:

Interest Rates

The contract interest rate decreased in three out of four categories of AD&C loans from Q4 2024 to Q1 2025:

  • The average interest rate declined from 8.48% to 8.23% for Land Acquisition loans.
  • The average interest rate declined from 8.28% to 7.86% for Land Development loans.
  • The average interest rate declined from 8.34% to 8.08% for speculative single-family construction loans.
  • The average interest rate increased from 7.75% to 7.96% for pre-sold single-family construction loans. 

Credit Availability

For land acquisition in Q1 2025:

  • 4% reported credit improved
  • 17% reported credit had tightened (down from 28% reporting tightened credit from Q3 2024 to Q4 2024)

For land development in Q1 2025:

  • 5% reported credit had improved
  • 19% reported credit had tightened (down from 21% that reported tightened credit from the Q3 2024 to Q4 2024)

For single-family new construction in Q1 2025:

  • 8% reported credit had improved
  • 11% reported credit had tightened (down from 16% reporting tightened credit from Q3 2024 to Q4 2024)

View the full Q1 2025 survey results.