Credit conditions on loans for residential Land Acquisition, Development & Construction (AD&C) were still tightening in the second quarter of 2026, according to NAHB’s quarterly survey on AD&C Financing. The net easing index derived from the survey posted a second-quarter reading of -12.0 (the negative number indicating net tightening). This marks the eighteenth consecutive quarter that residential builders and developers have reported tightening credit conditions.
In contrast, the similar net easing index based on the Federal Reserve’s survey of lenders moved slightly above zero, with a second-quarter reading of +3.7. This is the first time lenders reported easing credit conditions while builders and developers were simultaneously reporting tightening since NAHB began comparing the two series in 2013.
More details from the Fed’s survey of lenders—including measures of demand and net easing for residential mortgages—appeared in a previous post.
Among NAHB builders and developers who reported tighter credit conditions in the second quarter, 53% reported that one of the ways lenders tightened was by requiring personal guarantees or collateral not related to the project—putting the entire business, rather than just an individual project, at risk. Tied for second place on the list of common ways lenders were tightening (each reported by 47% of builders and developers) were increasing the interest rate, lowering the loan-to-value or loan-to-cost ratio, and refusing to make relationship loans.
Also in the second quarter, NAHB builders and developers generally reported a rising cost of credit, albeit with a few exceptions. The average contract rate increased on two of the four categories of loans tracked in the AD&C survey: from 7.42% to 7.77% on loans for land acquisition, and from 7.27% to 8.09% on loans for land development. Meanwhile, the contract rate actually declined at least slightly on the other two: from 7.31% to 7.28% on loans for speculative single-family construction, and from 7.19% to 7.01% on loans for pre-sold single-family construction.
On loans paid off as quickly as is typical in single-family construction, however, the initial points charged on the loans can be a particularly strong driver of overall credit cost. In the second quarter of 2026, average initial points increased on all four categories of AD&C loans: from 0.50% to 1.05% on loans for both land acquisition and land development, from 0.62% to 0.85% on loans for speculative single-family construction, and from 0.55% to 0.71% on loans for pre-sold single-family construction.
Those changes left the average effective interest rate (taking both contract rate and initial points into account) essentially unchanged at 11.67% (compared 11.68% in the first quarter) on loans for pre-sold single-family construction. On the other three types of AD&C loans, the average effective rate increased: from 9.36% to 10.43% on loans for land acquisition, from 10.15% to 12.59% on loans for land development, and from 11.22% to 11.82% on loans for speculative single-family construction. On all four categories of AD&C loans, the average effective rate in the second quarter of 2026 was over 0.6 percentage points higher than it had been at the end of 2025.
The role of elevated mortgage rates and their adverse effect on housing affordability have received considerable attention lately—for example, in Eye on Housing’s recent post on tepid existing home sales. Mortgage rates are not the only way the cost of credit affects housing markets, however. Access to AD&C credit at a reasonable cost plays an important role in enabling builders and developers to expand the supply of affordable housing.
More detail on credit conditions for residential builders and developers is available on NAHB’s AD&C Financing Survey web page.