As refinances continue to fall, a new market could be opening up for lenders as construction lending and renovation picks up speed.
The housing stock is aging in the U.S., and now nearly 65% of homes are more than 25 years old, according to a new report from Land Gorilla.
(Video credit: Alcynna Lloyd)
Many of these older homes are in need of updates, renovations or repairs, according to the report. This, combined with the recent slew of natural disasters in 2017, which displaced thousands, left conditions ripe for lenders who focus on construction to permanent and renovation loans.
And according to the Joint Center for Housing Studies, these trends are expected to continue over the next decade. Baby Boomers are expected to continue driving gains in new construction and renovations over the next decade. And while Baby Boomers are leading the charge, Gen Xers are also beginning to enter their prime remodeling years.
“The complexities of residential construction lending present quite a challenge for many lenders as they lack expertise to launch competitive solutions, while others face challenges with internal constituents left with a bad taste in their mouth from the housing crisis,” Land Gorilla stated.
However, third party vendors and technologies have emerged to help lenders avoid many of the most common pitfalls including deficient budgets, under or over disbursements, project funding delays and builder performance.
What’s more, construction loans are expected to see a boost in 2018 as new home sales are expected to be the primary driver of the housing market this year.