Credit Conditions for Builders May Be Stabilizing, But Remain Tight

After more than five years of persistent tightening, NAHB’s survey on Acquisition Development & Construction (AD&C) financing finally shows conditions stabilizing somewhat in the first quarter of 2012.  After such a protracted period of decline, however, the stability comes at a very low level of credit availabity.  The NAHB survey results remain somewhat at odds with a similar net tightening index based on the Federal Reserve’s survey of senior loan officers, although the two indices now appear to be converging.  The Fed survey shows loan officers on balance reporting credit conditions in the real estate sector easing slightly since 2010, with more substantial easing occuring in the first quarter of 2012.

Among the types of loans covered in NAHB’s AD&C survey, credit still seemed to be tightening somewhat on loans for A&D.  In the first quarter of 2012, developers who said that availability of loans for land acquisition and development was getting worse (28% and 25%, respectively) continued to outnumber the relatively few (19% and 17%) who said conditions were improving.  The spread between the worse and better shares on A&D loans was noticeably larger for developers with fewer than 25 total starts.

The ending of further declines in AD&C loan availability and movement toward stability—albeit at very tight credit conditions—is consistent with evidence cited in the May 31 post by Rob Dietz, and with answers to questions included on the builder survey that generates the  NAHB/Wells Fargo Housing Market Index (HMI).

Two-thirds of builders responding to the May HMI survey said there had been no change in AD&C financing over the past 6 months.  In comparison, over that same period most builders reported that construction costs had gotten worse.  So, while the industry strives to recover from its most severe post-war recession, rising construction costs have emerged as a new obstacle, on top of other impediments like regulatory barriers and credit conditions that appear to be stabilizing but remain tight.

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15 Responses to Credit Conditions for Builders May Be Stabilizing, But Remain Tight

  1. [...] NAHB survey data of builders showed stabilization for lending, although builders still report lendin…. This is particularly true for builders with less than 25 starts a [...]

  2. [...] First, NAHB survey data of builders showed stabilization for lending, although builders still report lendin…. This is particularly true for builders with less than 25 starts a year. [...]

  3. [...] levels. As housing demand grows, home building will be constrained by challenges related to credit availability for builders and faulty appraisals. Share this:ShareTwitterFacebookLinkedInEmailLike this:LikeBe the first to [...]

  4. [...] levels. As housing demand grows, home building will be constrained by challenges related to credit availability for builders and faulty [...]

  5. [...] that some land development loans connected to home building are grouped in this other class. NAHB survey data suggest land development loans face tighter lending conditions than loans for resid…, so the quarterly decline in this other class may reflect ongoing tightness for acquisition and [...]

  6. [...] has been the dearth of credit for acquisition, development and construction (AD&C) loans. Recent NAHB survey data suggest some net loosening of credit for construction loans but ongoing tightness for acquisition and development [...]

  7. [...] has been the dearth of credit for acquisition, development and construction (AD&C) loans. Recent NAHB survey data suggest some net loosening of credit for construction loans but ongoing tightness for acquisition and development [...]

  8. [...] has been the dearth of credit for acquisition, development and construction (AD&C) loans. Recent NAHB survey data suggest some net loosening of credit for construction loans but ongoing tightness for acquisition and development [...]

  9. [...] that some land development loans connected to home building are grouped in this other class. NAHB survey data suggest land development loans face tighter lending conditions than loans for resid…, so the quarterly decline in this other class may reflect ongoing tightness for acquisition and [...]

  10. [...] that some land development loans connected to home building are grouped in this other class. NAHB survey data suggest land development loans face tighter lending conditions than loans for resid…, so the quarterly decline in this other class may reflect ongoing tightness for acquisition and [...]

  11. […] The FDIC data reveal that the total decline from peak lending for home building AD&C loans continues to exceed that of other AD&C loans (nonresidential and some land development).  Such forms of AD&C lending are off a smaller 63% from peak lending. Some land development loans connected to home building are grouped in this other class. NAHB survey data suggest land development loans face tighter lending conditions than loans for resid…. […]

  12. […] The FDIC data reveal that the total decline from peak lending for home building AD&C loans continues to exceed that of other AD&C loans (nonresidential and some land development).  Such forms of AD&C lending are off a smaller 63% from peak lending. Some land development loans connected to home building are grouped in this other class. NAHB survey data suggest land development loans face tighter lending conditions than loans for resid…. […]

  13. […] Some land development loans connected to home building are grouped in this other class. NAHB survey data indicate land development loans face tighter lending conditions than loans for res…. […]

  14. […] Some land development loans connected to home building are grouped in this other class. NAHB survey data indicate land development loans face tighter lending conditions than loans for…. […]

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