According to the National Association of Home Builders (NAHB) Survey on Acquisition, Development & Construction (ADS&C) in Q3 2021, the effective interest rates increased in all four categories of loans tracked. The Q3 results reversed a general downward trend that has been ongoing since Q3 of 2020.
AD&C reports that in Q3 2021, the average effective rate (based on rate of return to the lender over the assumed life of the loan taking both the contract interest rate and initial fee into account) increased from 6.15% in Q2 of 2021 to 6.50% in the Q3 of 2021 on loans for land acquisition, from 7.15% to 8.33% on loans for land development, from 8.09% to 8.55% on loans for pre-sold single-family construction, and from 7.40% to 8.37% on loans for speculative single-family construction.
The NAHB survey also produces a net easing index that summarizes the change in credit conditions on AD&C loans, similar to the net easing index constructed from the Federal Reserve’s survey of senior loan officers (SLOOS).
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Construction Loans Slightly More Available, But at Higher Rates