Builders Struggles with Acquisition, Development and Construction Financing Continued in Q2 of 2020

The results of the latest National Association of Home Builders financing for Acquisition, Development and Construction (AD&C) survey reveals that credit continued to tighten in the second quarter of 2020.  The net tightening index, which is derived from the survey came in at 12.0, after reaching an 8½-year high of 22.7 in the first quarter of 2020. Positive numbers indicate tightening of AD&C credit, a negative number indicates an easing. Survey respondents reported that unlike the first quarter of 2020, builders and developers sought new AD&C loans, as interest rates were lowered. What they discovered however, was that lenders were less interested in making AD&C loans. The survey reported that some lenders simply said they were not making new loans, while other sighted the COVID-19 pandemic as a reason for greater caution. Those who might consider lending changed their LTV and LTC ratios and then reduced the amount of which they were willing to lend. All of which resulted in tighter credit available for AD&C loans.

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