Single-family construction loans increased in the third quarter, despite the overall softening of the lending climate.
Loan balances for 1-4 family construction increased to $91.2 billion in the third quarter, the first annual increase in more than two years.
However, the overall volume of acquisition, development, and construction (AD&C) loans decreased for the sixth consecutive quarter.
According to FDIC data, the total amount of outstanding AD&C loans declined to $463.0 billion in the third quarter of 2025, a 5.6% decrease from the previous year.
This year-over-year fall was driven by a 7% decrease in other real estate development loans, which totaled $371.8 billion.
Meanwhile, the volume of loans for 1-4 family home building and land development increased by 0.5% year on year to $91.2 billion in the third quarter.
It is important noting that the FDIC data only indicate the stock of loans and not changes in the underlying flows, making it an imperfect data source.
Nonetheless, lending has declined significantly in recent years. The present volume of existing 1-4 family residential AD&C loans is 56% lower than the peak level of residential construction lending of $204 billion recorded in the first quarter of 2008.
In recent years, alternative sources of finance, such as equity partners, have supplemented the capital market.
Construction Loan Quality Metrics
While the total volume of 1-4 family residential construction loans increased, the amount of loans 30 days or more past due or nonaccrual declined marginally to $1.1 billion during the quarter.
This makes up 1.2% of the overall 1-4 family residential construction loan volume.
To break this down further, the volume of loans 30-89 days past due was $418.1 million, while the volume in nonaccrual status was $593.4 million.
The nonaccrual loan status volume climbed from $572.4 million in the second quarter, while the 30-89 past due volume decreased from $469.2 million.
Loans are classified as nonaccrual when one or more of the following conditions are met: the loan is 90 days or more past due on principal or interest (unless it is well-secured and in the process of collection); the bank no longer expects full repayment of principal and interest; or the borrower’s financial situation has significantly deteriorated, necessitating cash-basis accounting.
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