Acquisition, Development and Construction Loan Volume Decreased in Q3 2020 as Cost of Borrowing Increased

During a period of rising builder confidence and expansion of single-family home building lending for construction declined. Continuing a period of weakness that began in Q4 of 2019. The latest FDIC-insured institution data suggests that home builders were deleveraging during the market rebound of the second half of 2020, as the cost of credit for acquisition, development and construction (AD&C) increased. On a year-over-year basis, (Q3 2019 \Q3 2020) the stock of residential construction loans is down -2.4%, enduring a period of loan weakness that began with the housing soft patch of 2018/2019. This marks the first year-over-year decline since 2013. Since the Q1of 2013, the stock of outstanding home building construction loans has grown by 93%, an increase of almost $37.7 billion. Lending remains much reduced from years past. The current amount of existing residential AD&C loans now stands 62% lower than the peak level of residential construction lending of $204 billion reached during Q1 of 2008.

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AD&C Loan Volume Fell Back in Third Quarter