Residential AD&C Credit Conditions Remain Tight in Q3 2026

While credit availability continued to contract, AD&C financing costs showed only modest quarter-to-quarter movement in the third quarter of 2026, with no clear trend toward either higher or lower overall borrowing costs (Source ID: 1). The average contract interest rates for land development loans decreased from 8.09% to 7.83%, while land acquisition loans increased from 7.77% to 8.08%. Speculative single-family construction loans also saw an increase in rates, from 7.28% to 7.72% (Source ID: 1). [1]

At the same time, initial points on AD&C loans declined across all four categories, with land acquisition points dropping from 1.05% to 0.86% and land development points decreasing from 1.05% to 0.97% (Source ID: 1). These offsetting moves left effective borrowing costs—combining contract rates and points—little changed for most types of AD&C credit, with speculative single-family construction remaining essentially flat at 11.83% in Q3 (Source ID: 1). [1]

Credit conditions for residential land acquisition, development and construction (AD&C) loans tightened again in the third quarter of 2026, extending a nearly five-year stretch of more restrictive lending for homebuilders, according to a National Association of Home Builders (NAHB) survey (Source ID: 1). NAHB’s quarterly AD&C Financing survey showed a net easing index of -15.3 in Q3, meaning more builders and developers reported tighter credit than easier credit. It marks the 19th consecutive quarter of net tightening for AD&C borrowers, NAHB economist Paul Emrath wrote in an analysis published Nov. 13. [1]

The findings closely track the Federal Reserve’s October survey of senior loan officers. NAHB reported that the Fed’s net easing index for residential AD&C loans came in at -15.5 in the third quarter. Aside from modest lender-reported easing in the second quarter of 2026, both lenders and builders have indicated that AD&C credit has been tightening steadily since early 2022. The Fed’s index has been in negative territory in 18 of the past 19 quarters. [1]

Credit conditions for residential land acquisition, development and construction (AD&C) loans tightened again in the third quarter of 2026, extending a nearly five-year stretch of more restrictive lending for homebuilders, according to a National Association of Home Builders (NAHB) survey (Source ID: 1). The survey found that a net easing index of -15.3 in Q3, meaning more builders and developers reported tighter credit than easier credit. It marks the 19th consecutive quarter of net tightening for AD&C borrowers, NAHB economist Paul Emrath wrote in an analysis published Nov. 13. [1]

The findings closely track the Federal Reserve’s October survey of senior loan officers. NAHB reported that the Fed’s net easing index for residential AD&C loans came in at -15.5 in the third quarter. Aside from modest lender-reported easing in the second quarter of 2026, both lenders and builders have indicated that AD&C credit has been tightening steadily since early 2022. The Fed’s index has been in negative territory in 18 of the past 19 quarters. [1]

At the same time, initial points on AD&C loans declined across all four categories, NAHB found: Land acquisition: from 1.05% to 0.86% Land development: from 1.05% to 0.97% Spec single-family construction: from 0.85% to 0.71% Pre-sold single-family construction: from 0.71% to 0.51% Those offsetting moves left effective borrowing costs — which combine contract rates and points — little changed for most types of AD&C credit. [1]

Sources

HousingWire

Prepared with AI assistance from the cited sources.