United States, September 26, 2025
News Summary
Federal data show outstanding acquisition, development and construction (AD&C) loan balances fell to $469.1 billion, marking a sixth consecutive quarterly decline and a 5.3% drop year-over-year. The fall was led by reductions in other real estate development, while 1–4 family construction and land development balances stood at $89.8 billion, about 56% below the long-run peak. Reported delinquencies eased to roughly $1.1 billion (about 1.2% of the 1–4 family construction stock). With banks pulling back, builders are increasingly turning to private lenders, equity partners and institutional capital amid tighter underwriting and higher upfront requirements.
Outstanding AD&C Loans Drop to $469.1 Billion in Q2 2025 as Builder Credit Tightens
The supply of outstanding acquisition, development and construction (AD&C) loans fell again in the second quarter of 2025, driven by ongoing pullbacks in development lending and tighter credit conditions for builders. Overall AD&C balances dropped to $469.1 billion in Q2 2025, a decline of 5.3% from a year earlier and marking the sixth straight quarter of falling balances.
Key figures at the top
The largest portion of the decline came from loans classified as other real estate development, which fell to $379.3 billion and were down 2.3% from the prior quarter. Residential construction and land development lending for one- to four-family properties totaled $89.8 billion, down 2.0% year-over-year and down 0.3% from Q1 2025.
Why balances are falling
The data reflect the stock of outstanding loans at banks, not the flows of new lending, so changes in balances can come from loan payoffs, sales, or fewer new originations rather than just new lending activity. Banks have generally reduced construction exposure over recent years, and the current level of one- to four-family residential AD&C loans is about 56% lower than the peak of $204 billion reached in the first quarter of 2008.
Credit conditions and builder access
A separate survey of builders showed credit conditions are tightening, with more respondents saying financing is harder to get for land acquisition, development and construction. That tightening lines up with the lower volumes recorded in lender balance sheets and helps explain why other sources of capital — including equity partners and institutional lending vehicles — have played a larger role in recent years.
Delinquencies remain low as balances shrink
As the outstanding volume of one- to four-family residential construction loans declined, the dollar amount of loans 30 days or more past due or in nonaccrual also edged lower. Past-due and nonaccrual one- to four-family residential construction loans totaled $1.1 billion in Q2 2025, down from $1.2 billion in the prior quarter. That figure represented about 1.2% of the total one- to four-family construction loan stock. Loans in nonaccrual status alone were about $572.1 million, while loans 30–89 days past due were approximately $469.2 million.
How nonaccrual and delinquencies are treated
Loans are set to nonaccrual when they meet certain tests such as being 90 days or more past due on principal or interest (with limited exceptions), when full repayment is unlikely, or when the borrower’s finances show sharp deterioration and the lender shifts to cash-basis accounting.
What lenders and markets are doing
With many banks reducing their construction exposure because of capital rules and tightened risk appetite, institutional and private lenders have stepped in to fill gaps for larger projects, especially in multifamily. Some capital providers have raised funds to originate significant new construction loans targeted at experienced sponsors and projects with clear exit plans. At the same time, a wide set of lenders — including national banks, regional banks, credit unions and specialized finance companies — still offer construction loan products, but borrower requirements and product terms can vary widely.
Borrower considerations
Construction loans typically differ from standard mortgages. They often use draw schedules that release funds as work progresses, start with interest-only payments while the home is built, and require detailed plans and contractor agreements when applying. Many lenders require larger down payments, stricter underwriting and closer oversight of budgets and timelines.
Bottom line
The Q2 2025 numbers show a market that is still well below past peaks and adjusting to tighter bank lending. Outstanding AD&C balances continue to fall, delinquencies remain contained as loan books shrink, and alternative financing sources and specialized lenders are increasingly important for those building new homes and larger projects.
Frequently Asked Questions
What does the Q2 2025 AD&C loan decline mean?
The drop to $469.1 billion means banks are carrying fewer construction and development loans than they did a year ago and for several quarters. That can reflect fewer new loans being made, loans being paid off, or loans being sold to other investors.
Are delinquencies getting worse?
No. Delinquent and nonaccrual balances for one- to four-family construction loans fell slightly to $1.1 billion and represented about 1.2% of the outstanding balance in Q2 2025.
How does this affect someone building a new home?
Borrowers may find bank construction loan options more limited and underwriting tighter. That can mean higher down payments, more documentation, or working with alternative lenders or equity partners.
Are there other sources of construction financing?
Yes. Private lenders, institutional capital providers, mortgage lenders with construction products, and equity partners have become more visible in the market alongside traditional banks.
Do the FDIC figures show new lending or just balances?
The data reflect outstanding loan balances at banks, not the flow of new originations. Changes in balances can come from payoffs, sales, or fewer new loans being made.
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Quick Reference: Key Numbers and Features
| Metric | Q2 2025 Value | Change |
|---|---|---|
| Total AD&C outstanding | $469.1 billion | Down 5.3% year-over-year |
| Other real estate development | $379.3 billion | Down 2.3% from prior quarter |
| 1–4 family construction & land development | $89.8 billion | Down 2.0% year-over-year; down 0.3% q/q |
| Past-due & nonaccrual (1–4 family) | $1.1 billion | Down from $1.2 billion the prior quarter; ~1.2% of balances |
| Nonaccrual (1–4 family) | $572.1 million | Included in the $1.1 billion total |
| Peak comparison | Q1 2008 peak $204 billion (1–4 family) | Current level ~56% below that peak |
Notes: Figures are outstanding balances reported for bank portfolios and do not directly measure lending flows. Loan classifications reflect bank reporting categories for acquisition, development and construction lending.
Deeper Dive: News & Info About This Topic
Additional Resources
- Bankrate — Best Construction Loan Lenders
- Wikipedia: Construction loan
- BusinessWire — Dwight Secures Capital to Originate $1 Billion in Multifamily Construction Loans
- Google Search: Dwight secures capital originate $1B multifamily construction loans
- Investopedia — The Best Construction Loan Lenders
- Google Scholar: construction loan lenders institutional construction finance
- Forbes Advisor — Best Construction Loan Lenders
- Encyclopedia Britannica: construction loan
- CoStar — US Hotel Construction Lending Remains Tight Despite Interest Rate Drops
- Google News: construction lending Q2 2025
Author: Construction CA News
CALIFORNIA STAFF WRITER The CALIFORNIA STAFF WRITER represents the experienced team at constructioncanews.com, your go-to source for actionable local news and information in California and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Rose Parade, Coachella, Comic-Con, and the California State Fair. Our coverage extends to key organizations like the California Building Industry Association and Associated General Contractors of California, plus leading businesses in technology and entertainment that power the local economy such as Apple and Alphabet. As part of the broader network, including constructionnynews.com, constructiontxnews.com, and constructionflnews.com, we provide comprehensive, credible insights into the dynamic landscape across multiple states.
