AD&C Financing Conditions Ease At A Slower Pace


Builders and developers responding to NAHB’s AD&C Financing Survey continue to report easing credit conditions for acquisition, development, and single-family construction loans. In the third quarter of 2017, the overall net tightening index based on the AD&C survey was -7.7, indicating net easing. All major categories of AD&C financing also recorded net easing, with lending standards on land acquisition loans being easier than standards on land development loans, and net lending standards on single-family construction loans easing the least.

Although builders and developers continue to report net easing on AD&C financing, the pace of easing has slowed. In both the second quarter of 2017 and the third quarter of 2016, one year ago, the net tightening index was -10.7. 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 most notably on single-family construction loans, but also more modestly on land acquisition loans. Over the past year, the slowdown in the pace of net easing on AD&C loans overall largely reflected a marked deceleration in the pace of easing on standards for single-family construction loans. To a smaller degree, net lending standards on land development loans also slowed.

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. However, over the third quarter there was continued 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).

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1 reply

  1. Continued outstanding coverage of AD&C Residential Lending. Great work!

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