Stock of AD&C Loans Up Nearly 5% In Past 6 Months

One factor holding back an even stronger rebound in home construction has been the tight availability of acquisition, development and construction (AD&C) loans. However, it appears the period of dramatic declines in the outstanding stock of AD&C loans ended in 2012, and recent data confirm that net lending is on the rise.

According to data from the FDIC, the outstanding stock of residential AD&C loans made by FDIC-insured institutions rose by $1.126 billion during the third quarter of 2013, a quarterly increase of 2.7%. Since the end of the first quarter, the net stock of outstanding AD&C loans is up 4.8%, an increase of just under $2 billion.

It is worth noting the FDIC data report only the stock of loans, not changes in the underlying flows, so it is an imperfect data source. Nonetheless, the stabilization of the stock value over the last year and a half plus two quarters of increases indicate overall improving conditions for AD&C lending.  NAHB surveys of builders also suggest improving conditions.

However, lending remains much reduced from years past. The current stock of existing residential AD&C loans (the blue area on the graph below) of $42.7 billion now stands 79% lower (denoted by the red line) than the peak level of AD&C lending of $203.8 billion reached during the first quarter of 2008.

ADC_3q_13

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, land development, and multifamily). Such forms of AD&C lending are off a smaller 63% from peak lending. For the third quarter, this class of AD&C loans registered its first significant increase (1.6%).

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 residential construction purposes.

Despite the recent stabilization in residential AD&C lending, there exists a lending gap between home building demand and available credit. Since the beginning of 2007, the dollar value of the pace of single-family permitted construction is down 43%. During this same period, home building lending for AD&C purposes is down 78%.

This lending gap is being made up with other sources of capital, including equity, investments from non-FDIC insured institutions and lending from other private sources, which may in some cases offer less favorable terms for home builders than traditional AD&C loans.

About these ads

11 Responses to Stock of AD&C Loans Up Nearly 5% In Past 6 Months

  1. […] In other positive news for home builders, lending conditions for acquisition, development, and construction (AD&C) loans continue to improve, although a considerable lending gap between demand for AD&C loans and current loans persists. NAHB survey data indicate that for the third quarter, only 9% of those surveyed reported that lending conditions deteriorated, with 28% noting improving conditions. And FDIC data show that the stock of outstanding AD&C loans grew nearly 5% during the second and third quarters of the y…. […]

  2. […] Inventories dipped to 167,000 representing a 4.3 months supply and the lowest months’ supply level since the first quarter of 2013.  Builders continue to behave prudently and banks continue to hold tight on lending to builders for acquisition, development and construction loans. […]

  3. […] Inventories dipped to 167,000 representing a 4.3 months supply and the lowest months’ supply level since the first quarter of 2013.  Builders continue to behave prudently and banks continue to hold tight on lending to builders for acquisition, development and construction loans. […]

  4. […] Inventories dipped to 167,000 representing a 4.3 months supply and the lowest months’ supply level since the first quarter of 2013.  Builders continue to behave prudently and banks continue to hold tight on lending to builders for acquisition, development and construction loans. […]

  5. […] In other positive news for home builders, lending conditions for acquisition, development, and construction (AD&C) loans continue to improve, although a considerable lending gap between demand for AD&C loans and current loans persists. NAHB survey data indicate that for the third quarter, only 9% of those surveyed reported that lending conditions deteriorated, with 28% noting improving conditions. And FDIC data show that the stock of outstanding AD&C loans grew nearly 5% during the second and third quarters of the …. […]

  6. […] The share increased because the credit crunch made it more difficult for builders to obtain AD&C credit and for home buyers to obtain mortgage financing, thus producing relatively greater production […]

  7. […] The share increased because the credit crunch made it more difficult for builders to obtain AD&C credit and for home buyers to obtain mortgage financing, thus producing relatively greater production […]

  8. […] The share increased because the credit crunch made it more difficult for builders to obtain AD&C credit and for home buyers to obtain mortgage financing, thus producing relatively greater production […]

  9. […] Although the availability of credit for AD&C loans is easing, and the value of the outstanding stock of residential AD&C loans increased by 2.7% in the third quarter, lending is still much lower than in previous years, according to another report in the Eye on Housing blog. […]

  10. […] The share increased because the credit crunch made it more difficult for builders to obtain AD&C credit and for home buyers to obtain mortgage financing, thus producing relatively greater production […]

  11. […] The share increased because the credit crunch made it more difficult for builders to obtain AD&C credit and for home buyers to obtain mortgage financing, thus producing relatively greater production […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 7,099 other followers

%d bloggers like this: