Builders and Developers Experience Lower Interest Rates and Improved Credit Conditions in Q4 2020

The lower mortgage interest rates that home buyers have been enjoying at the end of 2020, have finally made their way to builders and developers, who are now experiencing lower interest rates and improved credit conditions. This according to the latest NAHB’s survey on financing for Acquisition, Development and Construction (AD&C). The net tightening index derived from the NAHB survey was -17.0 in the Q4 of 2020, compared to -3.3 in the Q3 of 2020. The index is constructed so that positive numbers indicate tightening of AD&C credit, negative numbers easing. In Q4 of 2020, the average effective rate remained unchanged at 7.27% on loans for land acquisition but decreased from 7.83% to 7.40% on loans for land development, from 8.76% to 7.87% on loans for speculative single-family construction, and from 9.25% to 8.73 % on loans for pre-sold single-family construction. The NAHB notes that the higher effective rate on pre-sold relative to spec single-family construction loans is an atypical situation and probably best regarded as a statistical anomaly.