Continued Easing Conditions for AD&C Loans


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 fourth quarter of 2014, the overall net tightening index based on the AD&C survey improved (i.e., declined) from -31.0 to -35.7. The index is constructed so negative numbers indicate easing of credit; positive tightening, so a lower negative index means greater easing. Meanwhile, a similar net tightening index from the Federal Reserve’s survey of senior loan officers showed credit tightening from -10.8 in the third quarter to -2.8 during the fourth quarter of 2014.


According to the NAHB survey, less than 7% of respondents report credit conditions worsening in the fourth quarter. For example, only 4% of NAHB members said availability of credit for land acquisition had gotten worse, compared to 41% who said it had gotten better. Only 4% reported worsening credit conditions for single-family construction, compared to 43% who reported better conditions.

Similarly, only 6% said credit available for land development was worse during the fourth quarter of 2014, compared to 37% who said it had gotten better. It’s worth noting that the share reporting better conditions for land acquisition in the fourth quarter of 2014 was the highest since the inception of the survey in 2005.

In the fourth quarter of 2014, builders and developers were asked to compare the availability of new loans for single-family speculative vs. pre-sold construction. Thirty four percent said the availability of spec loans is the same as for pre-sold loans, while 39% indicated availability of spec loans is somewhat worse than for pre-sold loans, and the remaining 27% said availability of spec loans is significantly worse than for pre-sold loans.

Some of the reasons given by those builders who said availability of single-family speculative loans is somewhat or significantly worse than for pre-sold loans were that banks are limiting the number of spec homes to build, banks’ requirements are too strict, and banks want assurance that loans are not risky.


Tags: , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: