Costs for loans to finance construction projects saw a significant increase in the spring and early summer of this year, according to a new survey.
And those costs apply to everything from land acquisition and development, to both speculative and single-family construction.
The document, Survey on Acquisition, Development & Construction, published by the National Association of Homebuilders, shows an increase in land acquisition loans over the first three months of this year from 6.3% to 8.1%, while loan costs for land development saw the biggest increases, moving from 7.8% to 9.5%.
The increase was just as significant in the area of speculative single-family construction projects, jumping from 7.3% to 8.4%. Pre-sold single-family construction loans, meanwhile, were up by more than half a percentage point, from 7.9% to 8.6%.
“The second quarter of 2022 was the second consecutive quarter during which both the NAHB and Fed indices were negative,” notes the survey, “indicating tightening credit conditions.”
Loan costs for all project phases have been generally moving upward since the spring of 2020. Despite the most recent increases, however, interest rates in the four development categories are still below where they were in 2018 and early 2019, when they generally ranged between 9% and 10%.
An indication of the daunting role that Covid-19 earlier played in the construction business, the survey notes that in the second quarter of 2020 some 57% of respondents to a NAHB survey agreed with the statement “lenders are pulling back because of coronavirus.”
In the most recent survey that number had rather swiftly fallen to 3%.
By Garry Boulard
