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 2022 Summary:

Credit Conditions

In the third quarter of 2022, 164 builders responded to NAHB’s Survey on AD&C Financing. Builders reported that credit continued to be less available and generally more costly than in the second quarter. The most common ways in which lenders tightened credit were by increasing the interest rate on the loans (cited by 74% of the survey respondents who reported tighter credit conditions), reducing the amount they were willing to lend (60%) and lowering the allowable Loan-to-Value or Loan-to-Cost ratio (46%).

  • 3% reported credit for land acquisition had improved in the third quarter; 43% reported it had gotten worse
  • 1% reported credit for land development had improved in the third quarter; 44% reported it had gotten worse
  • 2% reported better credit conditions for single-family new construction had improved in the third quarter; 27% reported it had gotten worse

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 second quarter on three of the four categories of loans tracked in the AD&C Survey.

  • 9.55% to 9.67% on loans for land development
  • 8.48% to 9.95% on loans for speculative single-family construction
  • 8.63% to 10.76% on loans for pre-sold single-family construction

The average effective interest rate on land acquisition loans decreased slightly from 8.19% to 7.97%.

View the complete Q3 2022 findings.

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