US AD&C Lending Condition: July 2015

US AD&C Lending Condition: July 2015

Builders and developers continue to report easing credit conditions for acquisition, development, and construction (AD&C) loans according to NAHB’s most recent survey on AD&C financing, although a separate Federal Reserve survey is trending differently.
In the second quarter of 2015, the overall net tightening index of the NAHB survey was -30.7,which represents somewhat less easing than in the first quarter of 2015 when the index was -33.7. The index is constructed so negative numbers indicate easing of credit; positive tightening, so a less negative index means less easing.

ADC
In contrast, a similar net tightening index from the Federal Reserve’s survey of senior loan officers showed tighter credit conditions: increasing from -2.7 in the first quarter of 2015 to 1.4 in the second quarter of 2015. This the first time the Fed’s index, which reflects both residential and commercial real estate AD&C lending conditions, has indicated net tightening since 2010.
Builders and developers continue to rely heavily on commercial banks for credit. Of the respondents who were seeking credit in the second quarter, 66% reported commercial banks were the primary source of loans for land acquisition, 73% for speculative single-family construction, and 74% for land development and pre-sold single-family construction. Private individual investors are generally the second most important source—especially for land acquisition, where 17 percent of respondents cited private individuals as the primary source of credit.

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