In today’s real estate market, the dynamics have shifted to favoring sellers—creating a marketplace buzzing with competition among buyers and a greater demand for bridge loans.
During a seller’s market, as we have in the housing cycle of 2023, the scarcity of available properties intensifies the race to secure a desirable home. Nonetheless, people still need homes to live in, and the allure of homeownership continues to drive demand.
But on the other side, the supply side struggles to keep pace, laying bare a stark housing inventory shortage that characterizes today’s market landscape.
One solution for prospective homeowners is the bridge loan. When used correctly, a bridge loan can be your best option for getting those keys in your hand.
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The seller’s market scenario
The current real estate landscape is prominently a seller’s market, characterized by a noticeable housing inventory shortage that has intensified competition among today’s buyers.
The housing inventory levels in the US reached a record low in 2022. As of August 2023, the National Association of Realtors (NAR) home-sales data showed a mere 3.3-month housing supply level, signaling a continued housing shortage.
As a significant indicator of the market’s health, housing starts have witnessed a notable decline. Housing starts are an economic indicator that reflects the number of privately owned new houses (technically housing units) on which construction has been started in a given period.
Recent data shows an 11.3% plunge in overall housing starts, reaching a more than three-year low in August, primarily attributed to a resurgence in mortgage rates, which has considerably weighed on home-building activities.
The inventory of specifically single-family housing under construction has also declined by 0.7% to a rate of 674,000 units, marking the lowest level since May 2021.
This decline further exacerbates the housing inventory shortage, making it tougher for buyers to find suitable homes.
In a real estate market like this one—where competition is fierce and time is of the essence—securing the right financing in the quickest manner possible is often crucial.
This is where bridge loans come into the picture, acting as a financial bridge that enables buyers to move swiftly in securing their desired property, even when their current home has yet to sell, or they’re awaiting access to long-term financing.
Consumer bridge loans are short-term financing solutions designed to bridge the financial disparity between the sale of one property and the purchase of another.
They’re typically secured by the buyer’s existing home and are meant to provide the necessary funds to secure a new property before selling the current one. Once the existing home is sold, the funds will be used to pay off the existing debt on the property
The primary objective of a consumer bridge loan is to remove the financial constraints that may delay a buyer from acting promptly in a competitive market.
These loans come with a tenure of usually up to one year, with the repayment being made once the existing property is sold or long-term financing is secured.
The interest rates for consumer bridge loans are often higher compared to traditional mortgages due to their short-term nature and the associated risks.
We’ve emphasized how consumer bridge loans often prove to be a benefit where the need to act quickly is paramount.
But they also provide the liquidity needed to make a competitive offer on a new home without having to wait for current properties to sell, thereby providing another advantage in a fast-paced market environment.
Hard money bridge loans offer an even bigger edge in today’s competitive real estate market.
Unlike traditional lending channels, these loans are typically funded by private investors or groups and are secured by the property itself.
This unique structure allows for a more flexible and expedient approval process—thereby giving you an even quicker edge for securing the home you want.
Apart from the extra speed with which these loans can be processed, the underwriting system is more focused on the property value rather than the borrower’s credit history, which can be a significant advantage for individuals with less-than-perfect credit.
With hard money bridge loans, the emphasis is on the asset’s value and the exit strategy, making them a viable and attractive option for seizing timely real estate opportunities in a fast-moving market.
In a seller’s market—where every moment counts—consumer bridge loans emerge as a reliable ally for homebuyers aiming to secure their dream home swiftly.
They not only bridge the financial gap from your current property to a new one but can provide a competitive edge that can make all the difference.
As you navigate the complex real estate landscape, consider bridge loans to expedite your home-buying journey.
The team at Marquee Funding Group is here to discuss the nuances of bridge loans and to answer your questions about how to get the best deal in a competitive market.Submit your loan scenario now for fast and simple financing.