Single-family construction loan volumes defied the broader cooling trend in construction financing during the third quarter of 2025, registering their first year-over-year increase in more than 24 months.
While the wider acquisition, development and construction (AD&C) lending market continues to contract, the single-family segment has shown renewed resilience, according to a recent National Association of Home Builders (NAHB) report.
The NAHB analysis, drawing on data from the Federal Deposit Insurance Corp. (FDIC), revealed that outstanding loans for one- to four-unit residential construction rose 0.5% annually to reach $91.2 billion in the third quarter. This growth stands in stark contrast to the total AD&C sector, which contracted for the seventh consecutive quarter. The aggregate volume of AD&C loans fell to $463 billion, a 5.6% decrease from last year.
The overall decline in the sector was largely driven by a retreat in “other real estate development” loans, a category that often includes commercial and multifamily projects. This segment dropped 7% year over year to $371.8 billion, weighing down the broader index even as single-family lending stabilized.
Historical context and alternative financing
Despite the recent uptick in single-family volume, construction lending remains significantly subdued by historical standards. The current stock of existing one- to four-family residential AD&C loans sits 56% below the peak level of $204 billion recorded during the first quarter of 2008.
The NAHB report noted that the FDIC data, while useful, represents the stock of loans rather than the underlying flows, making it an imperfect metric. However, the long-term reduction in bank lending suggests structural shifts in how projects are funded, as alternative sources of financing, including equity partners, have increasingly supplemented the capital market to fill the void left by traditional lenders.
Credit quality remains stable
As loan volumes for single-family projects ticked upward, credit quality metrics remained largely stable.
The volume of loans classified as 30 or more days past due or in nonaccrual status fell slightly to $1.1 billion over the quarter. As a share of total one- to four-family residential construction loan volume, distressed loans account for just 1.2%.
