Builders and developers continue to report easing credit conditions for acquisition, development, and construction (AD&C) loans according to NAHB’s survey on AD&C financing.
In the first quarter of 2015, the overall net tightening index based on the AD&C survey was -33.7, which represents somewhat less easing than in the fourth quarter of 2014 when the index was -35.7. The index is constructed so negative numbers indicate easing of credit; positive tightening, so a less negative index means less easing.
A similar net tightening index from the Federal Reserve’s survey of senior loan officers showed essentially no change in the credit: moving from -2.8 in the fourth quarter of 2014 to -2.7 in the first quarter of 2015.
The survey’s finding of continued easing of lending conditions for AD&C loans is consistent with increases in the FDIC-reported stock of residential construction loans for the first quarter of 2015.
According to the survey, at most 10% of respondents reported credit conditions worsening in the first quarter. For example, 10% of NAHB members said availability of credit for land acquisition worsened, compared to 31% who said it had improved. Only 1% reported worsening credit conditions for single-family construction, compared to 46% who reported better conditions. Similarly, only 7% said credit available for land development was worse during the first quarter of 2015, compared to 42% who said it had improved.
In the first quarter of 2015, builders and developers were asked to compare the availability of new loans for single-family speculative vs. pre-sold construction. Thirty-three percent said the availability of spec loans is the same as for pre-sold loans, while 43% indicated availability of spec loans is somewhat worse than for pre-sold loans, and the remaining 25% said availability of spec loans is significantly worse than for pre-sold loans.