According to both the Federal Reserve’s survey of senior loan officers and the National Association of Home Builders (NAHB) survey on residential Land Acquisition, Development & Construction (AD&C) financing, the availability of loans for AD&C continued to tighten in Q3. Both surveys produce a net easing index that is positive when credit is easing and negative when credit is tightening.
In Q3, both the NAHB and Fed indices were negative, indicating that builders and lenders were once again in agreement that credit was, on net, tightening. The NAHB index posted a reading of a negative 49.3—considerably lower that the negative 35.3 reading in Q2 and the most widespread tightening by builders since the 2010 trough of the Great Recession, according to the NAHB.
Both the Fed and NAHB indices shifted from net easing to net tightening at the start of 2022 and have now remained in negative territory for the past seven quarters.
According to the NAHB survey, the most common ways in which lenders tightened credit during the third quarter were by increasing the interest rate on the loans (cited by 80% of the builders and developers who reported tighter credit conditions), reducing the amount they are willing to lend (57%), and lowering the allowable Loan-to-Value or Loan-to-Cost ratio (52%).
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