How to Capitalize on a Hot Housing Market

The housing market isn’t just hot, it’s on fire. As the nation continues to make progress on its recovery from the pandemic, both demand for homes and a supply shortage have pushed median sale prices soaring, according to the National Association of Realtors. Median sale prices were up 16.2 percent year-over-year during the first quarter of 2021.

To navigate a market like this, investors and developers need to understand what buyers are looking for, how to capitalize on stable or growing asset classes such as build-to-rent homes, single-family rentals and multifamily properties, and how to obtain flexible real estate financing. Here are a few tips to help make the most of today’s housing market.

What will homebuyers be looking for in a home post-pandemic?

People have begun to view their homes differently since the onset of the pandemic. Homebuyers now seek a home with features that accommodate new hobbies and daily functions that previously were not performed as often within the home. Long-lasting lifestyle changes due to the survival mechanisms put in place by extended periods of lockdown will likely mean that people will be searching for spacious safe havens and remote work or education environments.

Here are three features that homebuyers and renters are now more likely to want in their future homes:

1. Dedicated spaces

After spending a lot of time at home, people naturally start to crave larger spaces; but residents aren’t just looking for more square footage. While an open floor plan is great for entertaining and making a space feel larger, homebuyers have recently found that having multiple separate rooms can be both comfortable and functional. This can include a home office, closed-off living room, media room, etc.

Separate rooms still provide options for family time and entertaining, but also allow everyone to do their own thing. This is important for those who have family members working or doing schoolwork from home.

2. Energy efficiency

Energy-efficient features have been upgraded to the “must-have” list. Not only are we spending more time at home, but we are using our utilities more, which can get expensive. Energy efficiency is a win for homeowners’ wallets and for the environment. Improvements like tankless water heaters, LED lighting, double-paned windows, and energy-efficient appliances are a few options for builders to include in newly constructed homes.

3. Storage

For many, it can be difficult to find storage space for emergency supplies or essential products. Plus, more time spent at home helps people realize how important it is to keep things organized and clutter-free. Extra pantry and closet space will likely be more “must-haves” for the rest of 2021 and beyond.

How investors are capitalizing on for-sale homes, single-family rentals, and multifamily properties in today’s market

build-to-rent home

For-sale homes, single-family rental communities, and multifamily properties have all displayed strong performance compared to other asset classes throughout the pandemic. This has allowed investors to capitalize on increased demand for these property types by putting their capital to work in high-growth secondary markets across the U.S. These include cities such as Coeur d’Alene, Idaho; Tampa, Florida; and Salt Lake City, Utah, to name a few. Many of these markets were already seeing a high amount of in-migration prior to the pandemic and have seen even more because of the public health crisis.

Each of these asset classes possess unique qualities that have made them strategic investments throughout the pandemic. Since people will always need a place to live, they are likely to remain viable investments for the foreseeable future. Reasons for this include the following:

• For-Sale Homes

Mortgage rates have reached record lows, thereby causing demand to skyrocket and drive up median home prices. As the pandemic sped up the flight from large, coastal cities, markets with already tight housing supply were constrained even further. This has led to a surge in construction and an accentuated need for high-quality, for-sale homes.

• Single-Family Rentals

Single-family rental communities have emerged as an increasingly popular option for those who want the amenities of a multifamily building with the breathing room afforded by a single-family home. Single-family rent growth more than doubled in April 2021, with prices increasing by more than 5 percent year-over-year.

• Multifamily Properties

The multifamily market has enjoyed a strong 2021 thus far. The asset class remains an attractive option for those looking for best-in-class amenities without the hassle of owning a home.

How to obtain construction financing for your project

With the housing market surging, there have been more commercial real estate construction lenders entering the market, creating more competition. Therefore, to win business, some commercial real estate lenders may not be enforcing the same rigorous underwriting standards as their peers, which could result in riskier loans. Be sure to do your due diligence when you’re looking to obtain financing for your real estate project. You want to find a hard money lender that you can rely on.

We recommend a private lender that has a good reputation, is willing to communicate and is flexible. Hard money loans are known to be more flexible than traditional lending options; therefore, if they are not willing to communicate and negotiate your terms, you might want to keep looking.

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation, or development of residential or commercial properties. The company has originated over $2.8 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one of our lending experts today.