Tag

Results

Browsing


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.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



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


Confidence in the market for new multifamily housing reflected mixed results year-over-year in the fourth quarter, according to results from the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB).  The MMS produces two separate indices.  While the Multifamily Production Index (MPI) increased seven points to 48 year-over-year, it is still below the break-even point of 50.  The Multifamily Occupancy Index (MOI) had a reading of 81, up four points year-over-year.

An MPI below 50 is consistent with the decline in multifamily starts that the sector experienced in both 2023 and 2024.  Multifamily developers are slightly less pessimistic than they were at this time last year, but supply-chain problems and high interest rates remain serious barriers to a stronger market.  NAHB forecasts multifamily construction will decline again in the first half of 2025 before stabilizing toward the end of the year, with the industry supported by a low national unemployment rate.

Reflected by the MOI reading of 81, occupancy rates for owners of rental properties have remained solid even as they are continuing to struggle with high operating costs.

Multifamily Production Index (MPI)

The MPI is a weighted average of four key market segments: three in the built-for-rent market (garden/low-rise, mid/high-rise, and subsidized) and the built-for-sale (or condominium) market.  The survey asks multifamily builders to rate the current conditions as “good”, “fair”, or “poor” for multifamily starts in markets where they are active.  The index and all its components are scaled so that a number above 50 indicates that more respondents report conditions as good rather than poor.

Three of the four components experienced year-over-year increases: the component measuring mid/high-rise units rose 13 points to 39, subsidized units increased 11 points to 52, and garden/low-rise units added one point 52.  The only component to experience a decline year-over-year was built-for-sale units, falling one point to 42.  However, only two MPI components (garden/low-rise and subsidized) were above the break-even point of 50.

Multifamily Occupancy Index (MOI)

The MOI is a weighted average of the three built-for-rent market segments (garden/low-rise, mid/high-rise and subsidized).  The survey asks multifamily builders to rate the current conditions for occupancy of existing rental apartments, in markets where they are active, as “good”, “fair”, or “poor”.  Similar in nature to the MPI, the index and all its components are scaled so that a number above 50 indicates more respondents report that occupancy is good than report it as poor. 

All three components for the MOI experienced year-over-year gains.  The component measuring mid/high-rise units rose 10 points to 74, subsidized units increased by three points to 91, and garden/low-rise units added one point to 81.  All three MOI components were above the break-even point of 50.

The MMS was re-designed last year to produce results that are easier to interpret and consistent with the proven format of other NAHB industry sentiment surveys.  Until there is enough data to seasonally adjust the series, changes in the MMS indices should only be evaluated on a year-over-year basis.

Please visit NAHB’s MMS web page for the full report.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



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


Confidence in the market for new multifamily housing showed mixed results year-over-year in the third quarter of 2024, according to results from the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB).  The MMS produces two separate indices: the Multifamily Production Index (MPI) had a reading of 40, an increase of two points year-over-year, while the Multifamily Occupancy Index (MOI) had a reading of 75, down seven points year-over-year.

While demand for rental apartments remains strong enough to support relatively high occupancy rates in existing projects, multifamily builders and developers continue to face many significant obstacles on new projects such as higher construction costs, the cost and access to financing, and the availability of land and regulations.  NAHB forecasts multifamily construction to remain weak for another year as the market works through a substantial number of units under construction, before beginning to move back to long-term trends toward the end of 2025.

Multifamily Production Index (MPI)

The MPI is a weighted average of four key market segments: three in the built-for-rent market (garden/low-rise, mid/high-rise, and subsidized) and the built-for-sale (or condominium) market.  The survey asks multifamily builders to rate the current conditions as “good”, “fair”, or “poor” for multifamily starts in markets where they are active.  The index and all its components are scaled so that a number above 50 indicates that more respondents report conditions as good rather than poor.

Two of the four components experienced year-over-year increases: the component measuring subsidized units rose seven points to 46 and garden/low-rise units increased three points to 48. As for the other two, mid/high-rise units remained at 28 while built-for-sale units posted a three-point decline to 29.  However, all four MPI components were below the break-even point of 50 (Figure 1).

Multifamily Occupancy Index (MOI)

The MOI is a weighted average of the three built-for-rent market segments (garden/low-rise, mid/high-rise and subsidized).  The survey asks multifamily builders to rate the current conditions for occupancy of existing rental apartments, in markets where they are active, as “good”, “fair”, or “poor”.  Similar in nature to the MPI, the index and all its components are scaled so that a number above 50 indicates more respondents report that occupancy is good than report it as poor. 

All three components for the MOI experienced year-over-year declines.  The component measuring mid/high-rise units dropped eight points to 66, garden/low-rise units fell seven points to 77, and subsidized units decreased three points to 86.  Nevertheless, all three MOI components were above the break-even point of 50 (Figure 2).

The MMS was re-designed last year to produce results that are easier to interpret and consistent with the proven format of other NAHB industry sentiment surveys.  Until there is enough data to seasonally adjust the series, changes in the MMS indices should only be evaluated on a year-over-year basis.

Please visit NAHB’s MMS web page for the full report.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



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

Pin It