AD&C Credit Conditions Continue to Ease

Builders and developers continue to report credit easing for acquisition, development, and construction (AD&C) loans according to NAHB’s survey on AD&C financing. In the third quarter of 2013, the overall net tightening index based on the AD&C survey was -23.3. The index is constructed so negative numbers indicate easing of credit. A similar net tightening index for commercial real estate lending from the Federal Reserve’s survey of senior loan officers was -9.9 in the third quarter 2013 for construction and land development loans.

AD&C_Nov

According to the NAHB survey, the availability of credit for land acquisition continues to improve. Only 9% of NAHB members said availability of credit for land acquisition had gotten worse in the third quarter, compared to 28% who said it had gotten better. Only 5% reported worsening credit conditions for single-family construction, compared to 38% who said it got better. For land development and multifamily construction, at least twice more members said availability was better than said it was worse. Another sign that conditions continue to improve is the fact that 61% of members report seeking loans for single-family construction in the third quarter, the highest share since July 2008.

Among members who said AD&C credit conditions had continued to deteriorate in the third quarter, the most common problems were lenders reducing the amount they are willing to lend (69%), lowering the allowable LTV (or loan-to cost) ratio (62%), simply not making new AD&C loans, and requiring personal guarantees or collateral not related to the project both cited by 54%.



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