Mortgage News Daily reports that AD&C loans ticked up in the second half of 2019.
Builders are finding that acquisition, development, and construction (ADC) loans in the last half of 2019 were both easier to access and less costly. That may be, in part, behind a fourth quarter 2019 surge in custom home building.
The National Association of Home Builders’ (NAHB’s) quarterly survey of its builder and developer members found that the average interest rate on ADC loans declined in Q4 from 6.39 to 6.13% on loans for land acquisition and from 6.31 to 5.94% on development loans. Loans for single family spec construction declined 36 basis points to 5.63% and from 5.63% to 5.38% for pre-sold homes. It was the second consecutive quarter in which rates for all four loan categories declined.
NAHB notes that, because ADC loans are typically short term, three years on average, points charged on the loans can be more important than the rate on the portion of the loan drawn down. Points on construction loans declined on average, from 0.92 to 0.82% on spec loans and from 0.74 to 0.64% on pre-sold loans. The trend for acquisition and development loans, however, moved in the opposite direction. On average they increased from 0.84 to 1.10% on the former and from 0.71 to 1.10% on the latter.
