AD&C Financing Survey
NAHB’s quarterly Survey on Acquisition, Development and Construction (AD&C) Financing asks builders and developers about whether the availability of AD&C credit has improved, worsened or stayed the same since the previous quarter. The results are tracked within NAHB’s Net Tightening Index, which is constructed so that positive numbers indicate tightening of credit, with larger numbers indicating more widespread tightening.
Fourth Quarter 2024 Summary
According to respondents to NAHB’s most recent Survey on Acquisition, Development & Construction Financing, the availability of financing for land acquisition, development and construction (AD&C) tightened modestly from the third quarter of 2024 to the fourth quarter. Both NAHB’s survey of members seeking loans and the Federal Reserve’s survey of senior loan officers indicated that credit has tightened for the twelfth consecutive quarter. However, builders and developers experienced decreased contract interest rates in all four categories of AD&C loans tracked by the survey.
The most common forms of credit tightening reported by survey respondents were lowering the loan-to-value or loan-to-cost ratio (reported by 72 percent of builders and developers); reducing the amount lenders were willing to lend (reported by 61% of builders and developers).
In Q4 2024, 101 builders responded to NAHB’s survey and reported the following:
Interest Rates
The contract interest rate decreased on all four categories of AD&C loans from Q3 2024 to Q4 2024. The average interest rate declined:
- from 8.50% to 8.48% for land acquisition loans;
- from 8.83% to 8.28% for land development loans;
- from 8.54% to 8.34% for speculative single-family construction loans; and
- from 8.11% to 7.75% for pre-sold single-family construction loans.
Credit Availability
For land acquisition in Q4 2024:
- 0% reported credit improved
- 28% reported credit had tightened (up from 20% reporting cedit tightened from Q2 2024 to Q3 2024)
For land development in Q4 2024:
- 7% reported credit had improved
- 21% reported credit had tightened (down from 26% who reported credit tightened from Q2 2024 to Q3 2024)
For single-family new construction in Q4 2024:
- 10% reported credit had improved
- 16% reported credit had tightened (up from 11% reporting credit tightened from Q2 2024 to Q3 2024)
