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 2023 Summary:
According to NAHB’s Survey on Acquisition, Development & Construction Financing, the availability of loans for acquisition, development and construction (AD&C) remained tight in the fourth quarter of 2023. While both NAHB’s and the Federal Reserve’s survey on credit availability have indicated tightening for eight consecutive quarters, the indications in the fourth quarter of 2023 were closer to signaling easing credit as either index has been since the first quarter of 2022.
Results from NAHB’s survey on the cost of credit were mixed. Contract interest rates on loans for pre-sold single-family construction rose slightly from the third quarter to the fourth quarter and loans for land development also increased. Rates for land acquisition loans remained the same in the fourth quarter as the third quarter and rates for speculative single-family construction declined.
In the fourth quarter (Q4) of 2023, 129 builders responded to NAHB’s survey and reported the following:
Interest Rates
The contract interest rates from Q3 2023 to Q4 2023 were reported as follows:
- 8.31% (no change) on loans for land acquisition
- 7.78% to 8.12% on loans for land development
- 8.66% to 8.41% on loans for speculative single-family construction
- 8.37% to 8.40% on loans for pre-sold single-family construction
Credit Availability
Builders reporting tightening credit from Q3 2023 to Q4 2023 reported the most common ways in which lenders tightened credit were to increase the interest rate on the loans (cited by 69% of the survey respondents who reported tighter credit conditions), reduce the amount they were willing to lend (73%) and lower allowable Loan-to-Value or Loan-to-Cost ratio (65%).
- 3% reported credit for land acquisition improved in Q4 2023; 25% reported it had tightened. (Down from 59% reporting tightened credit from Q2 2023 to Q3 2023.)
- 5% reported credit for land development had improved in Q4 2023; 31% reported it had tightened. (Down from 54% reporting tightened credit from the Q2 2023 to Q3 2023.)
- 9% reported credit for single-family new construction had improved in Q4 2023; 20% reported it had tightened. (Down from 37% reporting tightened credit from Q2 2023 to Q3 2023.)
