Currently Reading

Construction Loans Are Increasing With More Availability

Advertisement
New-Construction Projects

Construction Loans Are Increasing With More Availability

Builders are finding improved conditions for construction credits as effective interest rates increase

 


November 22, 2021
New construction start
Image: Stock.adobe.com

In the third quarter of 2021, average effective interest rates for land acquisition, land development, and single-family construction rose for the first time after a downward year-over-year trend, the NAHB’s Eye on Housing reports. 

Roughly 13 percent of NAHB builders are reporting more availability of credit for land acquisition while 14 percent saw improved conditions for land development. Lastly, despite a record shortage of buildable lots, 21 percent of builders found greater availability for single-family construction credit. 

In the third quarter of 2021, the average effective rate (based on  rate of return to the lender over the assumed life of the loan taking both the contract interest rate and initial fee into account) increased from 6.15 in the second quarter of 2021 to 6.50 percent in the third quarter of 2021 on loans for land acquisition, from 7.15 to 8.33 percent on loans for land development, from 8.09 to 8.55 percent on loans for pre-sold single-family construction, and from 7.40 to 8.37 percent on loans for speculative single-family construction.

Changes in the effective rate may be due to changes in either the contract interest rate, or in the initial points charged on the loan.  On three categories of AD&C loans, the average contract rate and average points both increased in the third quarter.  On land acquisition loans, the contract rate increased from 4.63 to 4.74 percent while the initial points increased from 0.69 to 0.88.  On development loans, the contract rate increased from 4.63 to 4.74 percent while the points increased from 0.64 to 0.89.  And on loans for pre-sold single-family construction, the contract rate increased from 4.32 to 4.49 percent while the points increased from 0.54 to 0.77.

Read More

Related Stories

Q+A

IHP Capital Partners' Richard Whiteley Discusses Land Opportunity for Home Builders

For builders seeking buildable lots, migration, remote work, and renters are all having an impact

Land Planning

How Home Builders Are Seeking Out Low Risk Land Acquisition

Some builders are cutting back on their investments to navigate a nationwide land shortage

Land Planning

How Land Banking Could Help Builders Battling Shortages

National builders are turning to land bankers to mitigate the risks associated with land ownership

Advertisement
Advertisement

More in Category




Advertisement
Advertisement

Create an account

By creating an account, you agree to Pro Builder's terms of service and privacy policy.


Daily Feed Newsletter

Get Pro Builder in your inbox

Each day, Pro Builder's editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.

Save the stories you care about

Lorem ipsum dolor sit amet lorem ipsum dolor sit amet lorem ipsum dolor sit amet.

The bookmark icon allows you to save any story to your account to read it later
Tap it once to save, and tap it again to unsave

It looks like you’re using an ad-blocker!

Pro Builder is an advertisting supported site and we noticed you have ad-blocking enabled in your browser. There are two ways you can keep reading:

Disable your ad-blocker
Disable now
Subscribe to Pro Builder
Subscribe
Already a member? Sign in
Become a Member

Subscribe to Pro Builder for unlimited access

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.