A RISE IN BRIDGE FINANCING
2023 will be a stable real estate market. Even though we have a systemic shortage of housing, the interest rates at 5-7% create a workable lending environment without hyperinflating the market. Those creating and owning multifamily will continue as the housing demand must be filled. Keep updated with the processes of background checks and evictions as many legal protocols put in place during the pandemic remain in play. There are tenants who have become knowledgeable of the system, so be sure that you ask the tough questions and listen very closely to the answers of prospective tenants. TENANT SCREENING WILL BE CRUCIAL
A MARKET THAT LOOKS LIKE 2013-2016
The 2023 market will be dictated by the 3 Rs of homes— R ates, R ecession and R eservoir. I’m guessing mortgage R ates will level out in the low 6%s. Most people believe we are in or will enter a R ecession in 2023. However, while many recessions have been spearheaded by high unemployment, this one looks to be less impactful on employment. The last R is possibly the most important—what does the R eservoir of home supply look like? Many builders have already pumped the brakes dramatically, and many would-be sellers don’t want to trade their current 3% interest rate for today’s 6% rate. If that continues, prices won’t fall too much. I think we’ll have a market that looks like 2013-2016, which was a relatively healthy market with nothing to brag about, but nothing too dramatic.
Rates will continue to rise this year. Potentially, a small increase into 2023. We will see a rise in Bridge-to-Bridge financing opportunities but finding a lender that wants it will be challenging. Many groups that took out a bridge 18- 24 months ago that did not put a rate cap on are looking to infuse capital or sell, so there will be lots of good opportunities coming late Q1 to Q2. I see the SOFR start to drop slowly in Q2, opening up the opportunity to see a little cash flow. We will see loan assumptions on the rise as well and recourse debt will be very appealing. Agency remains lower leverage, a good option for long-term hold.
TENANTS HAVE BECOME KNOWLEDGEABLE OF THE SYSTEM.
WE WILL SEE LOAN ASSUMPTIONS ON THE RISE AS WELL AS RECOURSE DEBT.
MANY BUILDERS HAVE ALREADY PUMPED THE BRAKES DRAMATICALLY.
Julie Anne Peterson Senior Director Old Capital Lending Connect on LinkedIn
William Whitehouse Real Estate Agent Team Whitehouse Connect with William
Jason Kogok Author of Plug the Holes, Fill the Barrel Read Jason’s Book
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