Investor optimism has remained undimmed despite market volatility, says executive
2024 may have been marked by turbulence in the housing and mortgage markets, but that’s done little to dim the appetite of investors eyeing up opportunity in real estate, according to a top lending professional.
Nate Zielinski (pictured), senior partnerships coordinator at RCN Capital, told Mortgage Professional America that investors had maintained a bullish outlook even amid the unpredictable market of the first half of the year – and that optimism appears to have paid off with rates seeing a sharp dip in recent months.
That’s contributed to an “exciting” year on the investment front despite the market’s volatility. “You go back to the beginning of the year and it was always the economy, inflation, interest rates, that seemed to be dominating the industry as a whole,” Zielinski said.
“There was kind of a negative outlook towards the beginning of the year, but investors definitely persevered. They’re a hardy bunch, so that didn’t stop them. You spoke to any experienced investor, they were like, ‘This is nothing’.”
It might have been easy to assume that doom and gloom would pervade the industry thanks to persistently high rates in the opening months of the year – but that was far from the case, according to Zielinski, who said investors adopted a business-as-usual mentality during that period.
That’s helped contribute to a robust year for RCN, with Zielinski noting that the company set a record in August for most loans closed in a month since it opened its doors in 2010, and expanded its Charlotte office.
While higher rates helped weigh down on the fix-and-flip space, other product types stepped up to fill in the void – most prominently, a 30-year DSCR (Debt Service Coverage Ratio) loan. “The market certainly shifted away from fix-and-flip for a good six-to-eight month period,” Zielinski said. “So the DSCR program took over, ground-up construction.
“A lot of people were looking for that need to create their own inventory [because] inventory kind of dried up a little bit during a certain stretch of the year – so ground-up construction was huge for us… This year we really hit our stride with that program.”
Michelle Dugan, owner at MS Lending, sees a shift in homebuyer sentiment as mortgage rates drop. Her team is reaching out to clients who had paused purchases due to high rates, now offering rates as low as the mid-sixes. https://t.co/iTTCLiSI2U
— Mortgage Professional America Magazine (@MPAMagazineUS) October 14, 2024
Borrowers no longer dissuaded by current low-rate environment
Interest rates plunged during the COVID-19 pandemic, bringing about one of the most borrower-friendly markets in recent memory as access to cheap credit boomed. But while a rapid spike in rates since 2022 pushed many borrowers to the sidelines, Zielinski said a growing number are now used to the new rate reality.
Borrowers were “shellshocked” by an increase in average rates from 3% to above 7% after 2022, Zielinski said – “but now they’re back into the low sixes, high fives. So I think if they drop even a little bit more, we’re going to see a lot of investors want to refinance the loans that they have currently and take advantage of those lower rates.”
That means RCN is sharpening its marketing efforts towards a likely refinance surge in the months ahead and making sure loan officers are well-versed in those types of loan programs as they prepare for rates to slide further. “There’s going to be a lot of people knocking on our door that want to refinance,” Zielinski said.
“They got a loan maybe 12 to 18 months ago that was above 7%, now they’re looking at potentially dropping below 5.5% or maybe even below 5% if we get lucky enough.”
What should lenders be focused on as 2025 comes into view?
With 2024 coming to a close and 2025 already looming, lenders are setting their priorities as they gear up for a busy year ahead.
Refinances are an area every lending shop should be focusing on in the months ahead, Zielinski said: “sharpening your skills, being able to speak about them eloquently, offering them to the people who are knocking on your door, looking for a certain type of business.
“That’s when you want to have those conversations of, ‘What else do you have in your portfolio? Have you considered refinancing? Now looks like it’s a great time to do.’ I think those conversations are going to be had a lot in the early part of 2025.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
