The Housing Chronicles Blog: Builders and developers asked to dig deeper to pay down loans

Saturday, June 7, 2008

Builders and developers asked to dig deeper to pay down loans

At creditors tighten up lending requirements to builders and developers, many are asking clients to pay down existing loans. For smaller, private builders, this can mean tapping personal assets such as savings accounts, 401k savings and even home equity lines. From a Nation's Building News story:

A recent snapshot of builders and developers in a special survey by the NAHB Economics Group has found that acquisition, development and construction (AD&C) credit has tightened since last year.

In addition, while not a majority, significant numbers of builders and developers have been asked to pay down outstanding construction and land acquisition or development loans, according to the study.

More than 80% of all the respondents reported that the availability of new credit for land acquisition and land development had tightened this year compared to the second half of 2007.

Sixty-nine percent of the respondents said that credit had become more constricted over that timeframe for single-family construction loans, while 29% responded that loan availability remained about the same.

On the multifamily production front, 78% reported worsening conditions for construction loans, and 20% said they had seen no change...

Of those who had been asked to pay down land acquisition or land development loans, personal savings was the source of the money for 54% of the respondents. Twenty-six percent took out equity from an investment property, 21% took out equity from their primary residence and 20% said they borrowed from an investor or sold personal assets.

About 8% of those buying down loans borrowed from their 401(k) accounts and 5% borrowed from a friend or relative.

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