Credit Still Tight, Although Builders Report Slight Improvement


Availability of new loans for acquisition, development, and construction (AD&C) has finally started to improve slightly, according to NAHB’s survey on AD&C financing for the third quarter  of 2012.  The overall net bank tightening index calculated from the AD&C survey dropped from +6.0 in the second quarter down to -4.3.  The way the index is constructed,  negative numbers indicate easing of credit; positive numbers tightening.  At -4.3, the index is now lower than it has been at any time since 2005.


NAHB’s net tightening index is now roughly in line with the similar index that the Federal Reserve produces from its survey of senior loan officers.  In the third quarter, the Fed’s net tightening index was -8.8.  Through 2010 and most of 2011, there was a 30 to 40 point gap between the NAHB and Fed tightening measures, but the two indices have since converged—and, in the third quarter of 2012, builders and lenders both agreed that availibility of credit in the construction sector was improving slightly.   Slight improvement in one quarter, of course, is not enough to undo all the cumulative adverse effects of the persistent and often massive tightening that occurred quarter-after-quarter from 2007 through (according to NAHB’s survey) 2011.

The view that credit for builders has improved slightly but still remains tight is consistent with NAHB’s analysis of FDIC data and housing permits.

Full results of NAHB’s AD&C financing survey for third quarter are available online:

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