Builders and developers continue to report easing credit conditions for acquisition, development, and construction (AD&C) loans.
On net, 30.3% of survey respondents indicated that overall lending standards on AD&C loan availability had eased in the third quarter of 2015. In the second quarter, a net share of 30.7% of survey respondents said that lending standards had eased. Since the index is constructed so that negative numbers indicate credit easing, and positive numbers mean that credit is tightening, then the graph below shows that net lending standards were -30.3% in the third quarter of 2015 and -30.7% in the previous quarter.
Recent report from the Federal Deposit Insurance Corporation (FDIC) indicate that the volume of AD&C debt is expanding. According to the FDIC, the amount of residential AD&C loans outstanding expanded 4.7% during the second quarter of 2015, marking the 9th consecutive quarter of growth. On a year-over-year basis, the stock of residential AD&C loans is up 16.4% from the second quarter of 2014. The current reading marks the 5th consecutive quarter of year-over-year growth in the range of 16% to 17.5%. Information on bank balance sheets for the third quarter of 2015, including the outstanding amount of AD&C loans, is expected to be released on Monday.
Additional results from the third quarter of 2015 iteration of the NAHB’s AD&C Lending Survey include a more granular exploration of the availability of new construction loans. The most recent survey compared new loan availability for single-family speculative construction and pre-sold construction. According to the survey, 39% said the availability of speculative construction loans is the same as for pre-sold construction loans, while 41% indicated availability of speculative construction loans is somewhat worse than for pre-sold construction loans, and the remaining 20% said availability of speculative construction loans is significantly worse than for pre-sold construction loans. Some of the reasons given by those builders who said availability of single-family speculative construction loans is somewhat or significantly worse than for pre-sold construction loans were that banks do not want to take the risk of unsold homes, limiting or tightening the number of speculative construction loans, and banks feel lending is risky.