Acquisition, Development, And Construction Loan Growth Is A Good Sign For Expansion In Home Building

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March 01, 2016

A major factor that has been holding back a stronger rebound in home construction has been the tight availability of acquisition, development, and construction (AD&C) loans. But thanks to easing credit conditions and a growing loan base, the residential building market should see some expansion.

According to Eye on Housing, the outstanding stock of 1-4 unit residential construction loans rose $2.6 billion in the fourth quarter of 2015. That brings the total stock of outstanding loans to $60.9 billion.

The stock of residential construction loans has grown 18.9 percent on a year-over-year basis. This growth rate signals that 2016 should see accelerated building growth for single-family homes.

However, lending is still far reduced from prior years. The current stock of AD&C loans is 70 percent below its peak level of $203.8 billion that it reached during the first quarter of 2008. Still, the growth in outstanding stock of AD&C loans is a positive sign.

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