Credit conditions on loans for residential Land Acquisition, Development & Construction (AD&C) were still tightening in the first quarter of 2026, but only slightly, according to NAHB’s quarterly survey on AD&C Financing. The net easing index derived from the NAHB survey posted a first-quarter reading of -2.7. Although still negative (indicating that credit tightened since 2025 Q4), this is the closest the index has come to zero in the last four years.
Like the NAHB index derived from a survey of borrowers, a similar net easing index surveying lenders is produced from the Federal Reserve’s Senior Loan Officer Survey. This survey posted a reading of -4.9 in the first quarter of 2026, which was similarly still negative but fairly close to zero. The Fed considers anything between -5.0 and +5.0 “essentially unchanged.” Nonetheless, this marks the seventeenth consecutive quarter that both Fed and NAHB indices have been in negative territory.
More details from the Fed’s survey of lenders—including measures of demand and net easing for residential mortgages—appeared in a previous post.
Results on the cost of credit in the first quarter were mixed. The average contract rate on loans for pre-sold single-family construction increased slightly from 7.16% to 7.19% over the quarter.The other three categories of loans tracked in NAHB’s AD&C survey declined since the previous quarter: from 7.51% to 7.42% on loans for land acquisition, from 7.44% to 7.27% on loans for land development, and from 7.47% to 7.31% on loans for speculative single-family construction.
Probably of greater significance were the changes in initial points charged on the loans, which can be particularly important on loans paid off as quickly as they typically are for single-family construction. The average initial points decreased from 0.70% to 0.50% on loans for land acquisition, but increased from some of the lowest percentages on record in the fourth quarter of 2025 for the other three categories of AD&C loans. The increases were from 0.44% to 0.50% on loans for land development, from 0.34% to 0.62% on loans for speculative single-family construction, and from 0.37% to 0.55% on loans for pre-sold single-family construction.
Those combinations of quarter-to-quarter changes caused the average effective interest rate (taking both contract rate and initial points into account) to decline from 9.81% to 9.36% on loans for land acquisition and from 10.28% to 10.15% on loans for land development, but to increase from 10.64% to 11.22% on loans for speculative single-family and from 11.01% to 11.68% on loans for pre-sold single-family construction.
Although results on the average effective interest rate were mixed on a quarter-to-quarter basis, the rate for each of the four types of AD&C loans has declined significantly since peaking in the period between 2023 Q3 and 2024 Q2.
Also in the NAHB AD&C survey, 35% of respondents who built single-family homes during the first quarter of 2026 reported financing some of their homes with a construction-to-permanent (one-time-close) loan made to the ultimate home buyer. On average, 51% of the homes these respondents built were financed in this manner.
More detail on credit conditions for residential builders and developers is available on NAHB’s AD&C Financing Survey web page.