Builders and developers responding to NAHB’s AD&C Financing Survey continue to report easing credit conditions for acquisitions, development, and single-family construction loans. In the second quarter of 2017, the overall net tightening index based on the AD&C survey was -10.7, indicating net easing. All major categories of AD&C financing also recorded net easing, but land acquisition and single-family construction loans were comparatively easier than standards on land development loans. Though some concerns lurk, lending standards remain broadly supportive of continued loan growth.
Although builders and developers continue to report net easing on AD&C financing, the pace of easing has slowed. In both the first quarter of 2017 and the second quarter of 2016, the net tightening index was -25.0. The index is constructed so that negative numbers indicate easing of credit, so that the lower the index, the higher the extent of credit easing for AD&C loans. Over the quarter, the pace of easing slowed on land development loans and single-family construction loans while net availability on land acquisition loans were about the same. Over the year, net easing slowed the most on land development loans while the slowdown on land acquisition and single-family construction loans were similar.
Results from NAHB’s AD&C Financing Survey indicate continued easing, however, the Federal Reserve Board’s Senior Loan Officer Opinion Survey (SLOOS) suggests continued tightening. Over the second quarter, there was some convergence between the two measures. While the easing indicated by NAHB’s survey slowed over the quarter, the pace of tightening displayed in the SLOOS also slowed. The gap highlights the differences in the two surveys. In addition to being based on a survey of loan providers rather than consumers, the Federal Reserve index differs from the NAHB version by capturing all types of commercial real estate lending, including non-residential, an important distinction illustrated in previous NAHB analysis (here and here).