In Q2 2024, the volume of acquisition, development, and construction (AD&C) loans saw its steepest year-over-year decline since 2012, driven largely by high interest rates, according to the National Association of Home Builders’ Eye On Housing blog. During this time, residential construction loans dropped by more than 10% compared with the previous year. However, the availability of AD&C loans is expected to improve as the Federal Reserve continues easing its policies.
The volume of 1 to 4 unit residential construction loans made by FDIC-insured institutions declined 3.5% during the second quarter. The outstanding stock of loans declined by $3.3 billion for the quarter. This loan volume retreat places the total stock of home building construction loans at $92 billion, off a post-Great Recession high set during the first quarter of 2023 ($105 billion). The decline in loan volume is holding back private builder home construction and acting as a limiting factor for home builder sentiment.
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