Acquisition, Development & Construction Loan Rates Rose in Q1

Washington, DC, May 30, 2023-While mortgage rates were stabilizing in Q1 2023, rates on loans for acquisition, development & construction (AD&C) continued to climb, according to National Association of Home Builders’ (NAHB) quarterly Survey on AD&C Financing.  

From Q4 2022 to Q1 2023, the average effective rate (based on rate of return to the lender over the assumed life of the loan taking both the contract interest rate and initial fee into account) increased on all four categories of loans tracked in the AD&C Survey: from 10.14 to 11.09 percent on loans for land acquisition, from 10.41% to 11.88% on loans for land development, from 11.30% to 12.59% on loans for speculative single-family construction, and from 10.85% to 12.01% on loans for pre-sold single-family construction.  In all four cases, the effective rate was higher in Q1 2023 Q1 than it had at been at any time since NAHB began collecting the data in 2018.