The Federal Reserve cut rates twice in the fourth quarter of 2025. In theory, that should make construction financing easier to obtain. But the latest FDIC data tell a different story.
Outstanding acquisition, development, and construction (AD&C) loans fell to $456.3 billion in Q4, down 1.5% from the prior quarter. Lending for 1–4 family construction slipped slightly as well, even though it remains modestly higher than a year ago.
The message is simple: lower rates are not translating into easier credit for builders.
Banks remain cautious. Economic uncertainty, regulatory pressure, and lingering memories of past real estate cycles continue to shape lending behavior. In fact, construction lending remains 56% below its 2008 peak, underscoring how far the traditional bank financing channel has contracted.
At the same time, loan quality remains strong. Past-due and nonaccrual construction loans fell again in the fourth quarter, representing just 1.1% of outstanding volume.
That combination—healthy projects but cautious banks—helps explain why many builders have increasingly turned to alternative capital sources, private lenders, and equity partners to keep projects moving.
For builders looking to grow in today’s environment, the real constraint isn’t always demand.
More often, it’s access to new construction capital.
