Q4 Predictions for the Private Lending & Real Estate Industries

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There is one constant in the real estate industry: change. Trends come and go—and 2021 was certainly no exception. The national housing market has been picking up speed over the course of the past couple of years, even with the ongoing COVID-19 pandemic. Home values skyrocketed, buyer demand spiked and mortgage rates plummeted to unprecedented lows. It’s been quite the roller-coaster ride so far this year, but, truth be told, the industry has been one of the few silver linings in an otherwise challenging time.
It is still important to realize that the real estate market is and will continue to be in a state of constant flux. Take into account that the industry itself is extremely localized, with highly varying metrics across different cities, states and metro areas and there’s no denying that things won’t remain stagnant for long.
The good news is that understanding the basics of the market can help industry professionals stay abreast of all this change and plan accordingly. Here’s a closer look at the current state of the real estate industry and a look ahead to anticipated future developments.

Increasing Rents

For all the landlords out there, 2021 has been great for business. The eviction moratorium expired and rents have hit historic premiums. According to market data compiled by Realtor.com, the average monthly rent increased by 11.5% from August 2020 to August 2021—which also happened to be the first double-digit jump on the books. The numbers indicate that tenants are shelling out more in rent than they would for starter homes in the majority of the big markets across the United States. The median monthly rent came in at $1,633, with renters now paying an average of $169 more a month than they were a year ago. Specifically, two-bedroom rental properties experienced the most substantial increase in value, with the average fee jumping 12.3% this past year to $1,830 per month. Due to significantly reduced housing inventories in many areas, real estate experts predict that this trend will continue for the foreseeable future.

Slower Buying

The excessive competition that characterized the real estate market during the first half of 2021 is apparently waning. Some attribute the marked decrease in home-buying activity to the start of the school year, while others point towards the steadily increasing mortgage rates or buyer burnout. Whatever the underlying culprit may be, it is definitively easier to purchase property now than it was a few short months ago. Current home sales have fallen off by 2% in August 2021—the first dip in more than a year—and collective sales declined by just a shade over 6%. Buyers are reporting that bidding wars are a significantly less common occurrence than the initial quarters of 2021.

Escalating Home Values

Don’t be fooled by the aforementioned drop-off in competition. Just because some people are opting to hold off on buying houses, that doesn’t mean properties are not selling. They most certainly are—and more often than not at above-market values. Based on the most recent House Price Index released by the Federal Housing Finance Agency, the nationwide average home price increased by an astounding 19% as of this July from the previous year. In the single month from June 2021 and July 2021, the average home value ramped up by 1.4%. With housing inventory levels still struggling to compensate for the level of demand, this trend is likely to continue for quite some time until construction and development project delays fully recover from COVID-19 related issues.

Accessible Mortgages

The Mortgage Bankers Association reports that mortgage credit availability is on the rise, with a 3.9% jump in the past month alone. Basically, this means that lending standards are becoming comparatively less stringent, making it easier for aspiring borrowers to obtain a mortgage loan for real estate transactions. Just last month, the FHFA stated that they were eliminating policies limiting Fannie Mae and Freddie Mac’s ability to purchase investment property loans—which should translate into reduced rates and fees for this important category of mortgages in the coming months.

Key Takeaway

The intertwined industries of lending and real estate are always changing. The experts at Alpha Funding Partners can not only assist you staying on top of the latest developments, but can also leverage their knowledge and experience to help you achieve your goals. Contact us today to learn more!

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