According to NAHB’s quarterly survey on AD&C Financing, credit conditions on loans for residential Land Acquisition, Development & Construction (AD&C) were still tightening in the first quarter of 2026, albeit only marginally.
The first-quarter reading of the net easing index, which is derived from the NAHB survey, was -2.7.
This is the index’s closest approach to zero in the past four years, despite the fact that it remains negative (indicating that credit has tightened since 2025 Q4).
Similar to the NAHB index, which is derived from a survey of borrowers, the Federal Reserve’s Senior Loan Officer Survey generates a net easing index that surveys lenders.
In the first quarter of 2026, this survey reported a reading of -4.9, which was also negative but relatively close to zero.
The Federal Reserve regards any value between -5.0 and +5.0 as “essentially unchanged.” However, this quarter represents the seventeenth consecutive quarter in which both the Fed and NAHB indices have been in negative territory.
A previous post contained additional information regarding the Federal Reserve’s survey of lenders, which encompassed measures of demand and net easing for residential mortgages.
The cost of credit in the first quarter yielded inconsistent outcomes.
The average contract rate on loans for pre-sold single-family construction increased marginally from 7.16% to 7.19% during the quarter.
Since the previous quarter, the other three categories of loans monitored by NAHB’s AD&C survey have experienced a decline: loans for land acquisition have decreased from 7.51% to 7.42%, loans for land development have decreased from 7.44% to 7.27%, and loans for speculative single-family construction have decreased from 7.47% to 7.31%.
The changes in the initial points charged on the loans were likely of greater significance, as they can be particularly significant when the loans are paid off as rapidly as they are typically for single-family construction.
The average initial points on loans for land acquisition decreased from 0.70% to 0.50%, while the other three categories of AD&C loans increased from some of the lowest percentages on record in the fourth quarter of 2025.
Loans for land development increased from 0.44% to 0.50%, loans for speculative single-family construction increased from 0.34% to 0.62%, and loans for pre-sold single-family construction increased from 0.37% to 0.55%.
The average effective interest rate (which considers both the contract rate and initial points) decreased from 9.81% to 9.36% on loans for land acquisition and from 10.28% to 10.15% on loans for land development as a result of these quarter-to-quarter changes.
However, it increased from 10.64% to 11.22% on loans for speculative single-family and from 11.01% to 11.68% on loans for pre-sold single-family construction.
Despite the fact that the average effective interest rate varied from quarter to quarter, the rate for each of the four types of AD&C loans has decreased substantially since its peak between 2023 Q3 and 2024 Q2.
Additionally, 35% of respondents who constructed single-family homes during the first quarter of 2026 reported financing a portion of their homes with a construction-to-permanent (one-time-close) loan issued to the ultimate home buyer in the NAHB AD&C survey.
51% of the residences constructed by these respondents were financed in this manner on average.
The AD&C Financing Survey web page of NAHB provides additional information regarding credit conditions for residential builders and developers.
[Read more about this topic on Eyeonhousing.org]