US Builder Credit Conditions Tighten Slightly in Q1

According to the National Association of Home Builders (NAHB) quarterly survey of Acquisition, Development, and Construction (AD&C) financing, credit conditions for US builders continued to tighten in Q1, but only slightly.

The NAHB AD&C credit availability index registered negative 2.7 in Q1, indicating that credit conditions were tighter than in 2025Q4. However, the reading was the closest the index has come to zero in the past four years.

A similar net easing index from the Federal Reserve’s Senior Loan Officer Survey posted a reading of negative 4.9 in Q1. The Fed considers readings between negative 5.0 and positive 5.0 to be “essentially unchanged.” Still, Q1 marked the 17th consecutive quarter in which both the Fed and NAHB measures remained in negative territory.

Results on borrowing costs were mixed during the quarter. The average contract rate on loans for pre-sold single-family construction increased slightly to 7.19% from 7.16%. Rates declined in the other three loan categories tracked by the survey, falling to 7.42% from 7.51% for land acquisition loans, to 7.27% from 7.44% for land development loans, and to 7.31% from 7.47% for speculative single-family construction loans.

NAHB noted that although average effective interest rates showed mixed quarter-over-quarter results, rates for all four categories of AD&C loans have declined significantly since peaking between 2023Q3 and 2024Q2.