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Cost of Credit for Builders & Developers at Its Lowest Since 2022 – Eye On Housing

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The cost of credit for residential construction and development declined in the fourth quarter of 2025,  according to NAHB’s quarterly survey on Land Acquisition, Development & Construction (AD&C) Financing. In particular, the average contract rate declined on all four categories of loans tracked in the survey: from 7.95% in the third quarter to 7.61% on loans for land acquisition, from 7.68% to 7.44% on loans for land development, from 7.89% to 7.47% on loans for speculative single-family construction, and from 7.90% to 7.16% on loans for pre-sold single-family construction.   

Meanwhile, the average initial points paid by builders and developers fell on three of the four types of AD&C loans: from 0.83% to 0.44% on loans for land development, from 0.75% to 0.34% on loans for speculative single-family construction, and from 0.67% to 0.37% on loans for pre-sold single-family construction. The only exception was loans specifically for land acquisition, on which the average initial points increased slightly—from 0.66% to 0.70%.

The small increase in points on land acquisition loans was not enough to offset the drop in the contract interest rate, however, so the average effective interest rate (which takes both the contract rate and initial points into account) declined across the board: from 10.15% to 9.81% on loans for land acquisition, from 10.92% to 10.28% on loans for land development, from 12.04% to 10.64% on loans for speculative single-family construction, and from 12.74% to 11.01%  on loans for pre-sold single-family construction.

In all four cases, this was the lowest the average effective rate has been since the period of generally rising interest rates in 2022.

Notwithstanding the drop in rates, builders and developers continued to report tightening credit conditions in the fourth quarter of 2025. The net easing index derived from NAHB’s AD&C survey posted a reading of -9.3 (the negative number indicating that credit has tightened since the previous quarter). This is quite similar to the results from the perspective of lenders reported in the Federal Reserve’s survey of senior loan officers. The net easing index derived from the Fed survey posted a reading of -1.8 in the fourth quarter. Both the NAHB and Fed survey have now reported consistently tightening credit conditions for 16 consecutive quarters. In both cases, however, the net easing index in Q4 2025  came closer to the break-even point of zero (between tightening and easing) than it has at any time since the first quarter of 2022. 

More details from the Fed’s survey of lenders—including measures of demand and net easing for residential mortgages—appeared in a previous post.

Also, in the NAHB AD&C survey, 35% of respondents who built single-family homes during the fourth quarter of 2025 reported financing some of the construction with a construction-to-permanent (one-time-close) loan made to the ultimate home buyer. On average, 59% of the homes these respondents built were financed in this manner.

More detail on credit conditions for residential builders and developers is available on NAHB’s AD&C Financing Survey web page.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Top Posts – Cost of Constructing a Home in 2024 – Eye On Housing

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Construction costs account for 64.4% of the average price of a home, according to NAHB’s most recent Cost of Construction Survey.  In 2022, the share was 3.6 points lower, at 60.8%.  The latest finding marks a record high for construction costs since the inception of the series in 1998 and the fifth instance where construction costs represented over 60% of the total sales price.

The finished lot was the second largest cost at 13.7% of the sales price, down more than four percentage points from 17.8% in 2022.  The share of finished lot to the total sales price has fallen consecutively in the last three surveys, reaching a series low in 2024.

The average builder profit margin was 11.0% in 2024, up less than a percentage point from 10.1% in 2022.  

At 5.7% in 2024, overhead and general expenses rose when compared to 2022 (5.1%).  The remainder of the average home sale price consisted of sales commission (2.8%), financing costs (1.5%), and marketing costs (0.8%).  Marketing costs were essentially unchanged while sales commission and financing costs decreased compared to their 2022 breakdowns.

Construction costs were broken down into eight major stages of construction. Interior finishes, at 24.1%, accounted for the largest share of construction costs, followed by major system rough-ins (19.2%), framing (16.6%), exterior finishes (13.4%), foundations (10.5%), site work (7.6%), final steps (6.5%), and other costs (2.1%).

Explore the interactive dashboard below to view the costs and percentage of construction costs for the eight stages and their 36 components.

Table 1 shows the same results as the dashboard above in table format.  Please click here to be redirected to the full report (which includes historical results back to 1998).



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Where Renters and Owners Face the Highest Cost Burdens – Eye On Housing

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The housing affordability crisis continues to disproportionately affect renters, with more than half of renter households experiencing high-cost burdens — i.e., paying 30% or more of their income on rent and utilities. At the same time, current home owners, buoyed by significant home equity gains and locked in by below-market mortgage rates, are in a more advantageous financial position to weather the growing affordability crisis. According to the latest 2024 American Community Survey (ACS), more than half of all renter households (50.3%), or 23.2 million, are burdened by housing costs. Among home owners, this share is less than a quarter (24.3%) representing 21 million households. As a result, states and counties with higher shares of renters in their housing markets are more likely to have higher overall shares of households with cost burdens.

Geographically, Florida, Nevada, and California have the largest concentration of cost-burdened renters. In Florida, 60% of all renters pay more than 30% of their income on rent and utilities. In Nevada, the share is 57%, and in California, 55% of renters experience housing cost burdens. Even in states with comparatively low renter cost-burden rates—such as South Dakota, Alaska, and North Dakota—more than one-third of renters still spend 30% or more of their income on housing.

For home owners, cost-burden rates are generally lower, but the geographic pattern mirrors that of renters. California, Florida, and several Northeastern states report the highest shares of cost-burdened home owners. California faces the most severe affordability challenges, with one in three owners paying more than 30% of their income for housing. Florida and Hawaii follow closely, with 31% of existing home owners struggling to afford their homes.

At the opposite end of the spectrum, nine states in the Midwest and South report that fewer than 20% of homeowners are cost-burdened. West Virginia and North Dakota have the lowest rates, at just 16%.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Cost of Credit Eases for Builders and Developers

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The cost of credit for residential Land Acquisition, Development & Construction (AD&C) eased in the first quarter of 2025, according to NAHB’s survey on AD&C Financing. During the quarter, the average contract interest rate declined on three of the four categories of loans tracked in the NAHB survey: from 8.48% in 2024 Q4 to 8.23% on loans for land acquisition, from 8.28% to 7.86% on loans for land development, and from 8.34% to 8.08% on loans for speculative single-family construction. The average rate on loans for pre-sold single-family construction meanwhile bucked the trend, increasing from 7.75% to 7.96%.

In addition to interest, lenders also typically charge initial points on the loans. The points can affect credit costs as much as the interest rate—especially for loans paid off as quickly as most of those for single-family construction. In the first quarter of 2025, average points declined from 0.75% to 0.74% on loans for land development, and from 0.67% to 0.45% on loans for pre-sold single-family construction; but increased from 0.55% to 0.71% on loans for land acquisition, and from 0.64% to 0.68% on loans for speculative single-family construction.

The change in points was sufficient to offset the increase in interest rates on loans for pre-sold single-family construction, but not the reduction in rates on the other three categories of AD&C loans. As a result, the average effective interest rate (calculated taking both the contract rate and initial points into account) declined in all four cases: from 10.79% to 10.68% on loans for land acquisition, from 12.12% to 11.50% on loans for land development, from 12.86% to 12.59% on loans for speculative single-family construction, and from 12.98% to 12.49% on loans for pre-sold single-family construction.

Except for what now looks like a temporary reversal for construction loans in 2024 Q4, the average effective rate on AD&C loans has been trending downward for about a year. This stands in contrast to the average rate on 30-year fixed-rate mortgages, which has levelled off and even started to edge up again after coming off its 2023 peak.

While the cost of AD&C credit was declining, the NAHB survey shows that lending standards on AD&C loans were still tightening in the first quarter, although the reports of tightening were less widespread than they had been at any other time over the past three years. The net easing index derived from the survey posted a 2025 Q1 reading of -10.0 (the negative numbers indicating that net credit had become tighter since the previous quarter). This is the closest the NAHB index has come to hitting the break-even point of zero since the first quarter of 2022.

At the same time, the similar net easing index derived from the Federal Reserve’s survey of senior loan officers posted a 2025 Q1 reading of -11.1. This is down slightly from the previous quarter, but still ranks as the second highest reading for the Fed index since the first quarter of 2022. The Fed survey of lenders and the NAHB survey of builders and developers have been telling very similar stories recently, especially over the past five quarters. More details from the Fed’s survey of lenders—including measures of demand and net easing for residential mortgages—are discussed in a previous post.

Perhaps surprisingly, given the above results on declining credit costs, raising interest rates (cited by 57% of builders and developers who reported that availability of credit had worsened in the first quarter) has displaced lowering the loan-to-value or loan-to-cost ratio (50%) as the number-one way NAHB members say lenders are tightening conditions on AD&C loans. It is important to remember that relatively few NAHB members reported worse credit availability in the first place in 2025 Q1, so these percentages are based on a relatively small sample. Tied for third place, each cited by 43% of builders and developers, are increasing documentation requirements and requiring personal guarantees or collateral not related to the project. Meanwhile, the share of builders and developers who say lenders are reducing the amount they are willing to lend fell to 36%—the lowest percentage for this mode of tightening since 2018.

More detail on credit conditions for residential builders and developers is available on NAHB’s AD&C Financing Survey web page.

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This article was originally published by a eyeonhousing.org . Read the Original article here. .

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In Home Improvement

10 Ways to Control the Cost of Your Bathroom Remodel

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Kirk Riley DesignSave Photo
5. Tile With Restraint

Unless you’re planning a wet room, you don’t need to cover every inch with tile, Ghaly says. Not only is tiling just part of the room cheaper, both in terms of labor and materials, but also it’s often more practical.

“The advantage of part-tiling is that the bathroom becomes much more flexible,” he says. “For example, you can paint the rest of the walls, which means the bathroom can be redesigned more easily in the future, using different colors.

“Hanging pictures on bathroom walls is also becoming popular, and part-tiling gives you this option,” he adds.

When it comes to tile prices, Ghaly says, ceramic tiles are generally cheaper. “Imitation tiles — marble-look, for example — can be inexpensive yet will give your bathroom a similar luxury look and feel like the real thing.”

Shop for bathroom tile on Houzz



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Builder Confidence Falls on Cost Uncertainty

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Economic uncertainty, the threat of tariffs and elevated construction costs pushed builder sentiment down in March even as builders express hope that a better regulatory environment will lead to an improving business climate.

Builder confidence in the market for newly built single-family homes was 39 in March, down three points from February and the lowest level in seven months, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

Builders continue to face elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages. At the same time, builders are starting to see relief on the regulatory front to bend the rising cost curve, as demonstrated by the Trump administration’s pause of the 2021 IECC building code requirement and move to implement the regulatory definition of ‘waters of the United States’ under the Clean Water Act consistent with the U.S. Supreme Court’s Sackett decision.

Construction firms are facing added cost pressures from tariffs. Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home. Uncertainty on policy is also having a negative impact on home buyers and development decisions.

The latest HMI survey also revealed that 29% of builders cut home prices in March, up from 26% in February. Meanwhile, the average price reduction was 5% in March, the same rate as the previous month. The use of sales incentives was 59% in March, unchanged from February.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions fell three points to 43 in March, its lowest point since December 2023. The gauge charting traffic of prospective buyers dropped five points to 24 while the component measuring sales expectations in the next six months held steady at 47.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points in March to 54, the Midwest moved three points lower to 42, the South dropped four points to 42 and the West posted a two-point decline to 37. The HMI tables can be found at nahb.org/hmi.

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Builder Confidence Falls on Tariff and Housing Cost Concerns

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Builder sentiment fell sharply in February over concerns on tariffs, elevated mortgage rates and high housing costs.

Builder confidence in the market for newly built single-family homes was 42 in February, down five points from January and the lowest level in five months, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

While builders hold out hope for pro-development policies, particularly for regulatory reform, policy uncertainty and cost factors created a reset for 2025 expectations in the most recent HMI. Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023.

With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs. Reflecting this outlook, builder responses collected prior to a pause for the proposed tariffs on goods from Canada and Mexico yielded a lower HMI reading of 38, while those collected after the announced one-month pause produced a score of 44. Addressing the elevated pace of shelter inflation requires bending the housing cost curve to enable adding more attainable housing.

Incentive use may also be weakening as a sales strategy as elevated interest rates reduce the pool of eligible home buyers. The latest HMI survey also revealed that 26% of builders cut home prices in February, down from 30% in January and the lowest share since May 2024. Meanwhile, the average price reduction was 5% in February, the same rate as the previous month. The use of sales incentives was 59% in February, down from 61% in January.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three of the major HMI indices posted losses in February. The HMI index gauging current sales conditions fell four points to 46, the component measuring sales expectations in the next six months plunged 13 points to 46, and the gauge charting traffic of prospective buyers posted a three-point decline to 29.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points in February to 57, the Midwest moved two points lower to 45, the West edged one-point lower to 39 and the South held steady at 46. The HMI tables can be found at nahb.org/hmi.

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This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Credit for Builders Tightens, Cost Results Mixed

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Borrowers and lenders agreed that credit for residential Land Acquisition, Development & Construction (AD&C) tightened further in the fourth quarter of 2024, according to NAHB’s survey on AD&C Financing and the Federal Reserve’s survey of senior loan officers. The net easing index derived from the NAHB survey posted a reading of -16.3, while the similar index derived from the Fed survey posted a reading of -9.5 (the negative numbers indicating that credit tightened since the previous quarter). Although the additional net tightening in the fourth quarter was modest (as indicated by negative numbers much closer to 0 than -100), this marks the twelfth consecutive quarter during which both surveys reported net tightening of credit for AD&C.

According to the NAHB survey, the most common ways in which lenders tightened in the fourth quarter were by lowering the loan-to-value or loan-to-cost ratio (reported by 72% of builders and developers) and reducing the amount they are willing to lend (61%).  Additional information from the Fed’s survey of lenders—including measures of demand and net easing for residential mortgages—is discussed in an earlier post.

For the second consecutive quarter, the contract interest rate declined on all four categories of loans tracked in the NAHB AD&C survey.  In the fourth quarter of 2024, the average contract interest rate declined from 8.50% in 2024 Q3 to 8.48% on loans for land acquisition, from 8.83% to 8.28% on loans for land development, from 8.54% to 8.34% on loans for speculative single-family construction, and from 8.11% to 7.75% on loans for pre-sold single-family construction.

In addition to the contract rate, initial points charged on the loans can be an important component of the overall cost of credit, especially for loans paid off as quickly as typical single-family construction loans. In the fourth quarter, trends on initial points were mixed. The average points declined on loans for land acquisition, from 0.77% in 2024 Q3 to 0.55%. However, average points increased quarter-over-quarter on loans for land development (from 0.68% to 0.75%), pre-sold single-family construction (from 0.26% to 0.67%) and speculative single-family construction (from 0.49% to 0.64%).

Not surprisingly, the conflicting trends described above resulted in mixed results for the overall cost of AD&C credit, as indicated by the average effective interest rate (which takes both the contract rate and initial points into account).  In the fourth quarter of 2024, the average effective rate declined  on loans for land acquisition from 11.17% in 2024 Q3 to 10.79%, and on loans on land development from 12.82% to 12.12%.  Meanwhile, the average effective rate increased on loans for speculative single-family construction from 12.61% to 12.86%, and on loans for pre-sold single-family construction from 12.03% to 12.98%. Even after these disparate changes between 2024 Q3 and 2024 Q4, the average effective interest rates on all four categories of AD&C loans were at least slightly lower in 2024 Q4 than they were in 2024 Q2.

More detail on credit conditions for residential builders and developers is available on NAHB’s AD&C Financing Survey web page.

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Cost of Constructing a Home in 2024

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Construction costs account for 64.4% of the average price of a home, according to NAHB’s most recent Cost of Construction Survey.  In 2022, the share was 3.6 points lower, at 60.8%.  The latest finding marks a record high for construction costs since the inception of the series in 1998 and the fifth instance where construction costs represented over 60% of the total sales price.

The finished lot was the second largest cost at 13.7% of the sales price, down more than four percentage points from 17.8% in 2022.  The share of finished lot to the total sales price has fallen consecutively in the last three surveys, reaching a series low in 2024.

The average builder profit margin was 11.0% in 2024, up less than a percentage point from 10.1% in 2022.  

At 5.7% in 2024, overhead and general expenses rose when compared to 2022 (5.1%).  The remainder of the average home sale price consisted of sales commission (2.8%), financing costs (1.5%), and marketing costs (0.8%).  Marketing costs were essentially unchanged while sales commission and financing costs decreased compared to their 2022 breakdowns.

Construction costs were broken down into eight major stages of construction. Interior finishes, at 24.1%, accounted for the largest share of construction costs, followed by major system rough-ins (19.2%), framing (16.6%), exterior finishes (13.4%), foundations (10.5%), site work (7.6%), final steps (6.5%), and other costs (2.1%).

Explore the interactive dashboard below to view the costs and percentage of construction costs for the eight stages and their 36 components.

Table 1 shows the same results as the dashboard above in table format.  Please click here to be redirected to the full report (which includes historical results back to 1998).

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This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Housing Cost Burdens Across Congressional Districts

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While the lack of affordable housing dominates the headlines across the nation, congressional districts with higher shares of renter households are disproportionately affected by the current affordability crisis. Geographically, the districts with the largest housing cost burdens are heavily concentrated in California, Florida, and the coastal Northeast.

Buoyed by significant home equity gains and locked in by below-market mortgages rates, current home owners are in a more advantageous financial position to weather the growing affordability crisis. At the same time, renters are facing the worst affordability on record. According to the latest 2023 American Community Survey (ACS), more than half of all renter households, or 23 million, spend 30 percent or more of their income on housing, and therefore are considered burdened by housing costs. Among home owners, the share of households that are cost burdened is less than a quarter (24%). Nevertheless, this amounts to 20.6 million owner households who experience housing cost burdens. As a result, congressional districts where housing markets are dominated by renters are more likely to register higher overall shares of households with cost burdens.

In a typical congressional district, about a third of all households, renters and owners combined, experience housing cost burdens. In contrast, in the ten congressional districts with the highest burden rates, more than half of all households spend 30% or more of their income on housing.

The highest burden rates are found in five districts each in California and New York and two in Florida (see the chart above). In New York’s 15th and 13th, 55% and 52% of households, respectively, are burdened with housing costs. The vast majority of these households are renters, as reflected by the low homeownership rates in these districts, 16% and 13%, respectively. Similarly, the remaining top 10 districts with the highest shares of burdened households have homeownership rates well below the national average of 65%. On the list, only Florida’s 20th and 24th have homeownership rates that exceed 50%. Since congressional districts are drawn to represent roughly the same number of people, higher shares typically translate into larger counts of cost burdened households. To capture any remaining differences, the size of the bubbles in the chart correlates with the overall number of burdened households.

On the rental side, nine out of eleven worst burdened districts are in Florida. Close to two thirds of renters in Florida’s 26th, 20th, 25th and 19th are burdened with housing costs. The renter burden rates are similarly high in Florida’s 28th, 21st, 24th, 13th, and 23rd, where the shares of housing cost burdened renters are between 63% and 64%. Only California’s 27th and 29th register slightly higher burden shares exceeding 64%. At the other end of the spectrum is Wisconsin’s 7th, where just a third of renter households experience housing cost burdens.

Florida, New York, and California stand out for simultaneously having congressional districts with the highest shares of cost burdened renters and owners. The heaviest owner burden rates dozen consists of five congressional districts in New York and California each and two in Florida. In New York’s 9th and 8th districts, 43% and 42% of home owners, respectively, spend 30% of more of their income on housing. While high property taxes contribute heavily to owners’ burden in New York and California, fast rising insurance premiums strain home owners’ budgets in Florida.

The list of congressional districts with the lowest ownership burden rates include Alabama’s 5th, West Virginia’s 1st and 2nd, North Dakota’s at-Large, South Carolina’s 4th, Indiana’s 4th, 5th, and 6th, Arkansas 3rd, Tennessee’s 2nd, Missouri’s 3rd and 6th. Less than 17% of home owners in these districts spend 30% of their income or more on housing.

Additional housing data for your congressional district are provided by the US Census Bureau here.

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