Dive Brief:
- According to the National Association of Home Builders' third-quarter 2015 AD&C Lending Survey, a net 30.3% of builders and developers surveyed said that overall, lending standards on acquisition, development, and construction (AD&C) loan availability had eased in the third quarter of 2015, marking the 10th consecutive quarter of improvement. In comparison, in the second quarter, 30.7% said that lending standards had eased.
- In addition, the Federal Deposit Insurance Corporation reported that the amount of residential AD&C loans outstanding expanded 4.7% during the second quarter of 2015, marking that metric’s ninth consecutive quarter of growth.
- Year-over-year, the stock of residential AD&C loans is up 16.4% from the second quarter of 2014, marking the fifth consecutive quarter of year-over-year growth landing in the 16%-17.5% range.
Dive Insight:
The NAHB said it went in-depth in its third-quarter survey to further assess the availability of new construction loans. According to the survey, 39% of respondents said the availability of speculative construction loans is the same as pre-sold construction loans, and 41% said availability of speculative construction loans is somewhat worse than it is for pre-sold construction loans. Finally, 20% said the availability of speculative construction loans is significantly worse than for pre-sold construction loans.
According to respondents who felt speculative loans are harder to get, the reasons included: banks don’t want to take the risk of unsold homes, a limiting of the number of these types of loans, and banks feeling lending is risky in general.
Still recovering from the sting of the housing crash, lending in 2015 has increased at a measured pace. Although they are increasing lending, some banks are requiring more equity from applicants, capping project size, and negotiating terms designed to lower the number of defaults. Tighter restrictions have sent developers in search of alternate funding from private investors and non-bank lenders.
