As the world approaches nearly two years of a global pandemic that uprooted modern society, reshaped the way things were thought about and created ripples in the market that impacted just about everything we thought we knew, we are forced to continue to come to terms with this new “normal” and how to “make it work”. While nearly all facets of life and business were impacted, the real estate market, in particular, has experienced uncharacteristic shock waves as a result of it, with trends that very few could have predicted. Though the initial forecast of 2020 and its foreseeable future appeared grim, what suddenly followed was a drastic rebound filled with historical highs, unprecedented levels and new-fangled opportunities.
2020 Market Drivers
Before delving into 2021 and the trends that accompanied the real estate market, the stage that was set by the preceding year, 2020, must be noted. 2020 will be remembered as a year of extremes, with an acceleration of certain trends that benefited some sectors, while punishing others at the hands of a global pandemic that was incredulous to say the least. The market immediately plummeted, the United States Gross Domestic Product (“GDP”) declined by an atrocious percentage and people flocked to the suburbs to avail themselves of space, distance and safety. This was short lived.
The United States GDP quickly rebounded, the market rallied back dramatically, and people began to rethink their relocation endeavors. Within this tumultuous time period, 2020 ended up being a record-setting year for home sales in the United States, setting the stage for a 2021 to expectedly follow suit. The United States housing market increased by trillions of dollars and progressively strong demand led to immense competition amongst buyers, with homes flying off the market at record prices. Notably, this was all in a market where housing demand was already strong, with Millennials aging into prime first-time home buying years, coupled with competitive interest rates on mortgages.
2021 has seen this trend continue forcefully, with homeowners reaping the benefits of the equity tied to their respective properties, coupled with eager homebuyers on the hunt for deals in appealing neighborhoods across the country. While economic hardship was certainly prevalent and far-reaching, sweeping opportunities also came into the fold. Property owners, seeing the dramatic increase in the value of their properties coupled with low interest rates, were able to reap the benefits of refinancing into lower rates or cashing out on the equity tied to their property.
Additionally, with many new desirable neighborhoods, often surrounding urban metropolitan areas, becoming more appealing to homebuyers, house flippers flocked to purchase properties, rehab and ultimately sell them, all in a short window, for large profits. Sound Wall Street backed capital providers, identifying the market trends, found themselves in a very suitable position to act as the conduit to feed this need and provide financing across the country.
Roc – Moving Forward, Looking Back
Roc Capital (“Roc”), a vertically integrated financial services platform for real estate investors, already well versed in the space and recognizing this heightened need, reaped the benefits of its investments in 2020, setting the stage for an above-budget 2021. Roc invested heavily in departments such as technology, marketing and originations, doubling its head count in the midst of a pandemic. Maintaining a commitment to its clients, Roc continued to lend and provide liquidity, while most stopped, bolstering originations substantially. Roc focused on increasing the availability of new products, at desirable terms, to lenders, originators, investors, developers, landlords and the like.
Coupled with streamlined processes and a heightened focus on technology, Roc saw a significant uptick in origination volumes, including dramatic increases in the 30-year term product, offering financing on single property rentals, rental portfolios, multi-family, mixed use and ground up properties. Borrowers were able to seamlessly refinance their properties into lower rates, extrapolate cash from the increased equity in their properties and enter into a secure, long-term loan. Additionally, Roc facilitated cash-saving mechanisms, such as Consolidations, Extensions and Modification Agreements (“CEMA”) in New York, that allowed borrowers to significantly save on mortgage recording taxes, making these products even the more appealing.
Furthermore, fix and flip loans, otherwise known as “construction loans”, also saw their volumes increase, as investors identified neighborhoods throughout the country that appealed to prospective homebuyers, all during a time where moratoriums and government-backed mandates plagued many counties and states, thwarting otherwise frequent sourcing channels like foreclosure auctions and bank-owned Real Estate Owned (“REO”) sales. Roc continues to be a leading capital provider to private lenders, offering “white labeled” table funding solutions that allow lenders of all sizes to focus on originating and scaling their portfolio, all while protecting their brand with a dedicated team of relationship managers, legal personnel and underwriting support to assist every step of the way.
While 2021 saw home prices soar, eclipsing previous 12-month historical price jumps, the market appears to be slowing down, with price growth beginning to wane and normalize. While that seems to be the anticipated trajectory, the housing market still continues to move upward, albeit at a slower place, with expectations for this to continue into 2022.
While it remains to be seen, aggressively high inflation has likely increased the odds that the Federal Reserve will raise interest rates, and thus mortgage rates, sooner than later, which will presumably put downward pressure on home prices. Additionally, 2022 appears in line to see the end of mortgage forbearance protections as well as the lifting of foreclosure and eviction moratoriums across many counties and states, likely leading to a drive of inventory back up again.
Roc Capital, having funded over $4 billion in residential real estate investor loans since 2014, is positionally prepared to continue offering a multitude of real estate services, including financing through its Roc arm, title insurance through Wimba Title and property insurance through Elmsure, providing a vertically integrated one-stop-shop destination for real estate investors for what appears to be a prolific 2022.