Credit became tighter on loans for acquisition, development, and construction (AD&C) in the first quarter, according to an NAHB survey on AD&C financing. The survey produces a net easing index that summarizes the change in credit conditions, similar to the net easing index construction from the Federal Reserve’s survey of senior loan officers (SLOOS). The index posted a negative reading for both the NAHB and Fed in the first quarter, indicating tightening credit conditions.

The NAHB index stood at -2.3 while the Fed index was -4.7, compared to +9.7 and +10.3, respectively, in the fourth quarter of 2021. This is the first time that both measures show tightening credit conditions since mid-2020.

In the first quarter of 2022, 6% of the NAHB builders said availability of credit for land acquisition had gotten better, while 9% said it had gotten worse. For land development, 3% said credit conditions improved, while 14% of the respondents indicated that it had gotten worse. Finally, 11% of builders reported that the availability of credit for single-family construction had improved, compared to only 4% who said it had gotten worse.

One way lenders reduced availability of credit in the first quarter of 2022 was by lowering Loan-to-Value (LTV) and Loan-to-Cost (LTC) ratios. In the NAHB survey, the average LTV on all four categories of AD&C loans declined between the fourth quarter of 2021 and the first quarter of 2021: from 70.9 to 64.4% on loans for land acquisition, from 72.4 to 67.7% on loans for land development, from 76.7 to 74.1% on loans for speculative single-family construction, and from 77.4 to 76.0% on loans for pre-sold single-family construction.