What’s trending in the real estate and mortgage space now?
What is happening in the real estate and mortgage market that real estate investors need to be alert to now?
There is a lot developing in the property and finance space this year. Much of it is a part of larger cycles, but is just as important as seasonal and larger marco changes. Here’s what you need to know.
There are several groups who are entering the home buying and mortgage loan market with fresh credit. It has been 10 years since the financial crisis really hit home. That also means that a lot of negative credit is finally falling off of individual’s credit reports. Bankruptcies, foreclosures, and charge offs are all falling away. That can result great credit scores, but very lean and thin histories.
Generation Z is also maturing and graduating into their credit usage years. Some will blow it before they get going. Others have the chance to use smart leverage, buy homes, invest and get off to a great start.
One of the biggest groups of new real estate buyers this year is expected to be immigrants and foreign investors. Those, and returning US citizens who have grown up or lived for a decade abroad may have no US credit history either. Despite having high credit scores, they may not qualify for conventional loans due to credit depth requirements. This can leave them looking for alternate types of loans and funding, as well as private money lenders.
Wholesale Mortgage Brokers
Wholesale mortgage brokers have been making a surprise and quiet comeback. After being largely blamed and sacrificed by banks when the crisis hit the fan, they are once again becoming useful to bankers and lenders. They need an efficient way to originate more loans in a highly competitive and regulated marketplace. They also need a fall guy and scapegoat in case new more lenient loan programs fail to perform. In the meantime these brokers can be highly beneficial to borrowers looking for wholesale rates on home loans.
Extreme weather seems to have become more intense and common over the past couple of years. From major hurricanes to freezing nor’easters and ravenous wildfires property owners have been taking a beating from many directions. This creates a need for better preparation and planning, and maybe even some advanced strategies to minimize risk, and maximize upside. Where there is distress there is also a large need for real estate investors to serve by providing housing and helping motivated sellers exit properties.
The Hunt for Affordability
The hunt for affordable property is only expected to intensify this year. Home prices are up, and volatility in the stock market, cryptocurrency and political arena are only likely to drive more investment into the property market. However, even the wealthiest investors and VCs are finding it’s getting to rich for them. Peter Thiel recently announced a move out of Silicon Valley to more affordable LA, after saying most of the startup capital he had been investing was ending up in the pockets of urban slumlords. All investors who need viable house deals to flip and landlords who need yield are going to need to expand to more affordable destinations this year. The smartest will get ahead of the herd.
Interest Rates & Private Lending
It’s widely expected that interests will keep marching upwards. Unless CD and savings rates go up much further individuals will have to keep finding alternative ways to invest their cash. One of the most obvious to skip the bank and invest directly in mortgages. Instead of giving up all those fees and commissions and splits to the bank, individuals can help other individuals with their real estate investment and housing needs directly, give them a better deal, and keep more of the profits.
Existing mortgage note investors who did well over the last 5 to 10 years are also now finding it far more difficult to find deals and discounts on loans. It is a natural progression for them to move into originating their own private financing and mortgages.
There are a variety of trends in play this year. There are many great opportunities in the market. Yet, who the most active buyers and funding courses are may be very different. As will be where the busiest and most rewarding real estate destinations.