Credit Conditions Ease for Builders in 2nd Quarter

Filed in Housing Finance by on August 30, 2016 1 Comment

bankNAHB’s quarterly survey of builders and developers revealed that credit conditions for acquisition, development and single-family construction (AD&C) loans were easier in the second quarter of 2016 compared to the first quarter.

The NAHB net-tightening index dropped down to -25 in the second quarter. The index is constructed so that negative numbers indicate an easing of credit. In other words, the lower the index, the higher the extent of credit easing for AD&C loans. The index stood at -13.3 in the first quarter. An index reading of zero indicates that the percentage of builders reporting credit conditions are better is equal to the percentage of those who believe conditions have tightened.

More than half of the respondents of the NAHB survey reported that credit conditions were about the same in the second quarter. For example, 55% said credit availability was about the same for land acquisition, 56% reported no change for land development and 64% said conditions held steady for single-family construction.

However, at least 30% reported that credit conditions improved during the second quarter in all three areas — land acquisition (36%), land development (34%) and single-family construction (30%).

Commercial banks remain the main credit conduit for builders and developers. Of the respondents who were seeking credit in the second quarter, 76% reported commercial banks were their primary source of loans for land acquisition, 75% for speculative single-family construction, 75% for land development and 69% for pre-sold single-family construction.

View the full survey and more analysis in this Eye on Housing blog post.

Tags: ,

Comments (1)

Trackback URL | Comments RSS Feed

  1. With lower inventories from market to market it makes economic sense to build speculative homes in the middle of the for closed home sales. Interest rates are forecast to remain low too!
    Typically every speculative home helps to create two more home sales.
    Take the time to study your market through your favorite successful real estate brokers, economists and bankers.
    When an opportunity arises, go for it!
    ONwards and UPwards!

Leave a Reply

Your email address will not be published. Required fields are marked *