Single-family AD&C loan volume rose for the third consecutive quarter, according to the latest FDIC data. For builders, developers, and contractors, understanding the lending environment, and what those lenders are looking for, will set you up for success.
Loan Volume Is Growing, But the Market Is Still Constrained
Three straight quarters of year-over-year gains.
The total volume of outstanding 1-4 family residential construction and land development loans reached $91.8 billion in Q1 2026, up 0.8% from Q4 2025 and 1.9% from the same period last year. That marks three consecutive quarters of year-over-year growth—a meaningful signal that the broader pullback in construction lending may have found a floor.
That said, the market is still dramatically smaller than it once was. Current residential AD&C loan volume sits roughly 56% below the $204 billion peak reached in early 2008. A large portion of that gap has been filled by equity partners and private capital, and that structural shift has become a permanent feature of how construction projects get financed. If you’re relying solely on traditional bank financing, you’re fishing in a smaller pond than existed a generation ago.
Credit Is Available, but Lenders Are Being More Selective
What moves deals forward.
The uptick in loan volume is happening alongside a slight tightening in credit conditions. NAHB’s Q1 2026 AD&C Financing Survey noted a modest increase in lender caution—not a dramatic pullback, but a shift worth paying attention to.
In practice, this means banks and institutional lenders are still deploying capital, but they’re being more deliberate about who they lend to and on what terms. The builders moving through underwriting most smoothly right now tend to have a few things in common:
- Strong lender relationships established before the loan request
- Clean project “pro formas” with realistic schedules and contingencies
- Clear exit strategies and solid comps supporting the takeout
- Documentation prepared in advance—not assembled under deadline pressure
If your loan packages aren’t already tight, now is the time to sharpen them.
Credit Remains Critical
Keep a close eye on your loans.
One point from the FDIC data that deserves attention is the rise in loans that are past due or in nonaccrual status. In Q1, that figure reached $989.8 million—approximately 1.1% of total 1-4 family residential construction loan volume. The 30-89 day past due bucket grew from $414.2 million in Q4 to $451.3 million in Q1.
At 1.1%, the overall rate remains low by historical standards. But the directional movement in early-stage delinquencies is worth watching. Supply chain delays, extended permitting timelines, and labor constraints are all pushing project completions out—which can trigger technical delinquencies even on fundamentally sound deals.
If you’re managing a pipeline of projects, stay in close communication with your lender and get ahead of any timeline slippage before it becomes a loan performance issue.
What This Means for Your Capital Strategy in 2026
Preparation separates borrowers in a competitive market.
The trend is heading in the right direction. More capital is available for single-family residential construction than was the case a year ago. But the long-term contraction in traditional bank lending is real, and private lenders, bridge lenders, and specialty construction finance companies continue to play an essential role in getting projects to the finish line.
A few things worth keeping in mind as you plan your pipeline for the rest of the year:
- Stay proactive with your lender. In a tightening environment, communication matters. Don’t let timeline issues surface through a missed payment—get ahead of them.
- Know your full capital stack options. Bank financing isn’t the only path, and often isn’t the fastest or most flexible. Having alternative lending relationships in place before you need them is a competitive advantage.
- Keep project fundamentals tight. Underwriting scrutiny tends to increase when lenders sense broader market uncertainty. Strong comps, realistic schedules, and conservative contingencies help deals close faster.
- Watch the rate environment. Construction lending volumes are sensitive to rate movements. Any significant shift, up or down, will affect how aggressively lenders deploy capital in the back half of 2026.
The Q1 2026 data paints a picture of a market recovering steadily, if not dramatically. For builders and developers who have maintained strong lending relationships through the tighter years, improving conditions represent real opportunity. For those scaling back up, the environment is more accessible than it was—and it still rewards preparation.
CoFi works with builders, developers, contractors, and brokers to structure construction and bridge financing that fits your project and your timeline. If you want to talk through what the current lending environment means for your pipeline, reach out to our team.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a commitment to lend, or a guarantee of specific loan terms. Actual rates, terms, and approvals depend on individual borrower qualifications, project characteristics, and market conditions.
