The real estate scene over the past six quarters has felt like a rollercoaster. From the tank in the market as the world responded to the beginning of the COVID-19 pandemic, to the drastic rebound as we found our footing in response to the global emergency. But in the months following that rebound, the market hasn’t slowed down – WHY?
The response to COVID – While many markets suffered in response to the COVID outbreak, real estate thrived. The primary cause is what analysts have termed “urban flight”. As parallels between the prevalence of risk of exposure and population density began to be drawn, entire sections of populations from major cities all over the country began to flee to less dense, smaller cities and towns. This process has reduced housing stock in areas unprepared to compensate for sudden reduction. As is the general rule of markets everywhere, lower supply causes and induced demand. Sudden spikes in demand drives prices higher as scarcity continues to increase.
With Federal Reserve rates below 1%, and many major housing entities offering mortgage rates below 3%.
Low interest rates – One of the biggest key factors was the response of major loan providers across the country. With Federal Reserve rates below 1%, and many major housing entities offering mortgage rates below 3%, it’s appealing to buy a home right now. Keeping the rates of interest on home sales low makes the market more approachable to consumers, especially when there is good reason to leave metro areas.
The need to find deals – With home prices rapidly on the rise thanks to a critically low housing stock, consumers are feeling the pressure to find the best deal quickly. As prices rise, the average amount of time a house spends on the market drops, consumers want to snatch up their new home as quickly as possible, adding a degree of fanaticism to the transaction. This allows for a collective rise in prices across the board.
Asset Based Lending Helps You Leverage the Hot Real Estate Market
With the market being so hot, housing stock low, and millions of potential new homebuyers hitting the market through 2021, new home construction and drastic renovation projects by real estate investors will be increasingly critical in the coming months. Thankfully, a hot market makes the return on investment for real estate investors HIGH. When you’re ready to take on your next fix & flip project , contact First Equity Funding. We focus solely on asset-based lending to real estate investors looking to buy or fix up residential and commercial properties in 44 states throughout the US.