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 2024 Summary
According to NAHB’s Survey on AD&C Financing, the availability of financing continued to tighten in the third quarter of 2024. Both NAHB’s survey of members seeking loans and the Federal Reserve’s survey of senior loan officers indicated that credit has tightened for the eleventh consecutive quarter. However, builders and developers experienced decreased interest rates in all four categories of AD&C loans tracked by the survey.
The most common forms of credit tightening reported by survey respondents were:
- Lowering the loan-to-value or loan-to-cost ratio (reported by 61% of builders and developers)
- Requiring personal guarantees or collateral not related to the project (also reported by 61% of builders and developers)
- Reducing the amount lenders were willing to lend (reported by 56% of builders and developers)
In Q3 2024, 106 builders responded to NAHB’s survey and reported the following:
Interest Rates
The contract interest rate decreased on all four categories of AD&C loans from Q2 2024 to Q3 2024.
- The average interest rate declined from 9.28% in Q2 2024 to 8.50% in Q3 2024 for Land Acquisition loans.
- The average interest rate declined from 9.05% in Q2 2024 to 8.83% in Q3 2024 for Land Development loans
- The average interest rate declined from 8.98% in Q2 2024 to 8.54% in Q3 2024 for speculative single-family construction loans
- The average interest rate declined from 8.55% in Q2 2024 to 8.11% in Q3 2024 for pre-sold single-family construction loans
Credit Availability
- 5% reported credit for land acquisition improved in Q3 2024; 20% reported it had tightened. (Down from 43% reporting tightened credit from Q1 2024 to Q2 2024.)
- 7% reported credit for land development had improved in Q3 2024; 26% reported it had tightened. (Down from 42 percent that reported tightened credit from the Q1 2024 to Q2 2024.)
- 9% reported credit for single-family new construction had improved in Q3 2024; 11% reported it had tightened. (Down from 22% reporting tightened credit from Q1 2024 to Q2 2024.)
