Lending Conditions Continue to Tighten for Builders

Credit conditions for residential land acquisition, development, and construction (AD&C) loans continued to tighten in Q-3 2025, the National Association of Home Builders’ latest AD&C Financing Survey shows. The survey’s net easing index came in at –11.0, indicating that lending standards continued to tighten compared with the previous quarter.

According to the survey, 60% of builders say the most common change they’re seeing is lenders lowering the maximum loan-to-value ratio. An additional 47% of builders say that lenders are reducing the amount that they’re willing to lend or are requiring borrowers to pay interest out of pocket or fund an interest reserve themselves.

Results on the cost of credit in the third quarter were mixed. The average contract rate increased from 7.82% to 7.95% on loans specifically for residential land acquisition—but declined on the other three categories of loans tracked in NAHB’s AD&C survey: from 8.04% to 7.68% on loans for land development, from 8.17% to 7.90% on loans for speculative single-family construction, and from 7.95% to 7.90% on loans for pre-sold single-family construction.

Meanwhile, the average initial points charged on the loans increased across the board: from 0.56% to 0.66% on loans for land acquisition, from 0.74% to 0.83% on loans for land development, from 0.72% to 0.74% on loans for speculative single-family construction, and from 0.58% to 0.67% on loans for pre-sold single-family construction.