National Association of Home Builders tax and policy guru Rob Dietz looks at banks' lending to home builders for land acquisition, development, and vertical construction, from Federal Deposit Insurance Corp. data compiled from third-quarter activity. The news is positive.
Although the total stock of bank loans to builders is running at just under 30% of what it was during the boom-boom peak year of 2008, the trajectory of lending in this area has been growing. Construction--rather than acquisition and development--is the favored form of loan, of course, since this is where there's the least risk for the lenders. Dietz writes:
Despite the steady increases in residential AD&C lending, there exists a lending gap between home building demand and available credit. This lending gap is being made up with other sources of capital, including equity, investments from non-FDIC insured institutions and lending from other private sources, which may in some cases offer. less favorable terms for home builders than traditional AD&C loans.