Construction loans on the rise in 2018
According to the National Association of Home Builders (NAHB), interest rates on loans for residential acquisition, development, and construction (AD&C) generally increased throughout 2018.
The finding is based on the NAHB’s fourth quarter AD&C survey.
Builders and developers responding to the survey – for the fourth quarter – reported a median interest rate that varied from 5.75% on loans for pre-sold single-family construction, to 5.88% on loans for land development, to 6.00% on loans for both land acquisition and speculative single-family construction, the NAHB said.
In comparison to the third quarter, the median rate was slightly lower on development loans, 25 basis points higher on pre-sold construction loans, and unchanged on loans for acquisition and spec construction.
But earlier in 2018, interest rates had been consistently drifting upward. As result, the median interest rate on the various types of AD&C loans was 37 to 75 basis points higher in the fourth quarter of 2018 compared to the first quarter (when the AD&C survey began collecting data on loan terms).
The NAHB also noted that in the fourth quarter of 2018, lenders charged a median of 1.00 points on the loans for acquisition, development, and speculative construction; 0.63 points on the loans for pre-sold construction and all up from the third quarter.
Regarding credit availability, builders and developers reported a very slight easing in the fourth quarter.
The net tightening index constructed from the NAHB survey was -0.3—very close to the point of neutrality between tightening and easing. Previously, at -12.0 in the third quarter, the NAHB index was giving a sign of net easing.
A similar tightening index constructed from the Federal Reserve’s Survey of Senior Loan Officers has been showing tightening credit conditions. The Fed index went from +6.0 in the third quarter of 2018 to +13.0 in the fourth quarter.
The finding is based on the NAHB’s fourth quarter AD&C survey.
Builders and developers responding to the survey – for the fourth quarter – reported a median interest rate that varied from 5.75% on loans for pre-sold single-family construction, to 5.88% on loans for land development, to 6.00% on loans for both land acquisition and speculative single-family construction, the NAHB said.
In comparison to the third quarter, the median rate was slightly lower on development loans, 25 basis points higher on pre-sold construction loans, and unchanged on loans for acquisition and spec construction.
But earlier in 2018, interest rates had been consistently drifting upward. As result, the median interest rate on the various types of AD&C loans was 37 to 75 basis points higher in the fourth quarter of 2018 compared to the first quarter (when the AD&C survey began collecting data on loan terms).
The NAHB also noted that in the fourth quarter of 2018, lenders charged a median of 1.00 points on the loans for acquisition, development, and speculative construction; 0.63 points on the loans for pre-sold construction and all up from the third quarter.
Regarding credit availability, builders and developers reported a very slight easing in the fourth quarter.
The net tightening index constructed from the NAHB survey was -0.3—very close to the point of neutrality between tightening and easing. Previously, at -12.0 in the third quarter, the NAHB index was giving a sign of net easing.
A similar tightening index constructed from the Federal Reserve’s Survey of Senior Loan Officers has been showing tightening credit conditions. The Fed index went from +6.0 in the third quarter of 2018 to +13.0 in the fourth quarter.