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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.

Second Quarter 2024 Summary

According to NAHB’s Survey on AD&C Financing, the availability of financing continued to tighten in the second quarter of 2024 and became even more expensive for most types of loans. The Q2 2024 is the tenth consecutive quarter of AD&C credit tightening.

The two most common forms of credit tightening (each cited by 85% of survey respondents) were:

  • A reduction in the amount lenders were willing to lend
  • Lowering the loan-to-value (or loan-to-cost) ratio

These were followed by a three-way tie (each cited by 50% of respondents) between the following forms of tightening:

  • Increasing documentation
  • Increasing the interest rate  
  • Requiring personal guarantees or other collateral unrelated to the project

In Q2 2024, 94 builders responded to NAHB’s survey and reported the following:

Interest Rates

The average effective interest rates from Q1 2024 to Q2 2024 were reported as below. The effective interest rate takes the contract interest rate and initial points charged into account. Trends on average initial points were mixed in the second quarter but effective interest rates rose on three of the four categories of AD&C loans in the second quarter.

  • Loans for land acquisition increased from 11.09% to 12.22% (the highest these rates have been since NAHB began tracking the effective interest rates in 2018)
  • Loans for land development decreased from 13.10% to 12.93%
  • Loans for speculative single-family construction increased from 13.35% to 14.32%
  • Loans for pre-sold single-family construction increased from 12.95% to 13.08%

Credit Availability

  • 2% reported credit for land acquisition improved in Q2 2024; 43% reported it had tightened. (Up from 31% reporting tightened credit from Q4 2023 to Q1 2024.)
  • 2% reported credit for land development had improved in Q2 2024; 42% reported it had tightened. (Up from 31% that reported tightened credit from the Q4 2023 to Q1 2024.)
  • 2% reported credit for single-family new construction had improved in Q2 2024; 22% reported it had tightened. (Up from 17% reporting tightened credit from Q4 2023 to Q1 2024.)

View the full Q2 2024 survey results.