Builders and Developers Report Tighter Credit in the First Quarter of 2022

Builders reported tighter credit during the first quarter of 2022, causing a slight dip in the average loan-to-value ratio for pre-sold and speculative single-family construction as well as land development and acquisition, NAHB Eye on Housing reports. The NAHB’s net easing index fell to -2.3 compared to +9.7 in the fourth quarter of 2021, while the Fed’s index also dropped from +10.3 in Q4 2021 to -4.7 in Q1 2022.

Roughly 6% of NAHB builders reported that availability of credit for land acquisition had improved at the start of 2022, while 9% said it had gotten worse. Around 3% of builders said credit conditions improved for land development, while 14% of respondents reported worsening credit conditions. For single-family construction, 11% of builders noticed improvements in availability of credit, compared to just 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 percent on loans for land acquisition, from 72.4 to 67.7 percent on loans for land development, from 76.7 to 74.1 percent on loans for speculative single-family construction, and from 77.4 to 76.0 percent on loans for pre-sold single-family construction.

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