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Slight Improvement in AD&C Lending Detected in Third Quarter

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Slight Improvement in AD&C Lending Detected in Third Quarter
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Findings of NAHB’s newly published survey on acquisition, development and construction financing for the third quarter of 2012. indicate that availability of new loans in this area has finally started to improve, albeit very slightly. Of course, marginal improvement in one quarter is not enough to undo the cumulative adverse effects of the persistent, massive tightening that occurred from 2007 through 2011. But NAHB’s net tightening index, compiled from results of the survey, is now roughly in line with the similar index that the Federal Reserve produces from its survey of senior loan officers.


As noted in the executive summary of NAHB's survey, the small increase in credit availability in the latest quarter did not translate into continued improvement in the number of builders and developers putting projects on hold while waiting for the financing climate to improve. The shares of NAHB members putting various projects on hold were 50% for land acquisition, 52% for development, 45% for single-family construction, and 34% for multifamily construction—all little changed from the second quarter.

While these results do reflect significant improvement in the market since early 2009, the "improving" trend seems to have stalled during the past two quarters. And it's worth mentioning that the large percentages of developers who were neither acquiring land nor developing it over the past several years is one reason that a shortage of buildable lots is likely to emerge in some markets where demand for new housing is picking up.

For those who were seeking  loans in the third quarter of 2012, commercial banks remain the number one source of credit by a wide margin. Even so, the position of commercial banks has eroded slightly since late 2008, when they were the primary source of credit for well over 80% of those seeking loans for construction or land acquisition, and 95% of those seeking loans for development.

Agencies Announce Loan Limits Unchanged for 2013

The Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA) have announced that loan limits for conforming conventional and FHA-insured single-family loans will not change in 2013. Here are links to the agencies' respective announcements:

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  • Joanne Loftus
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