23 Nov The Real Estate Market has Cooled Post COVID
During the height of Covid, real estate prices soared dramatically to heights that were previously never seen. Especially in regions such as South Florida whose climate is warm and tropical, real estate prices increased exponentially realizing short term returns of 50% to 200% in certain wealthy enclaves.
The direct result of this phenomenon is that property owners suddenly had an unexpected abundance of equity in their properties. Along with this newfound equity, property owners were also enjoying historically low interest rates. This environment made for an opportune time to leverage their real estate assets so as to monetize the excess equity by pulling cash out of their properties.
As the effects of Covid subsided and the corresponding health threat waned, the economy then experienced a shift in the real estate market. In order to combat high inflation that was a direct result of excessive government spending, The Fed decided to embark on an aggressive draconian campaign of raising interest rates from historically low levels to a much higher current interest rate environment with no end in sight.
While the Fed was raising interest rates during the last two years, the real estate market grew much softer and real estate prices decreased as a bi-product of higher borrowing costs along with looser supply and lower demand for real estate assets. Suddenly, real estate equity is no longer quite as abundant as it was during the apex of the Covid virus.
Lenders have responded in kind to this higher interest rate environment and softer real estate market by tightening their loan underwriting standards and criteria to mitigate the corresponding risk that now exists in the marketplace.
Worth Avenue Capital specializes in arranging debt financing for both small businesses and real estate developers/investors and also handles bank workouts for those same clients. You can learn more about WAC by taking a look at the website and Youtube videos or by contacting WAC’s principal, Michael M. Ciaburri at worthavenuecapital@gmail.com or (203) 605-4082. WAC maintains offices in both Guilford and Greenwich, Connecticut as well as Palm Beach, Florida. Be sure to follow @worthavecapital on Twitter for the latest lending news.