Why Investors Should Know About Conventional Rates

Real Estate Market Update for Investors – September 2024

Welcome to Your September 2024 Market Update

Hey there, it’s Mike with The Cash Flow Company! I’m here to give you a quick rundown of where the real estate market is headed and what it means for you as an investor. Whether you’re looking at DSCR loans, fix-and-flip projects, or even conventional rates, I’ve got you covered. Let’s take a closer look at the real estate market update for investors.

DSCR Loans: Rates are Dropping

If you’ve been eyeing DSCR loans, there’s some good news. We’ve seen rates drop by about 30 basis points this month alone. For well-qualified clients with strong properties, rates are now in the high sixes for 75% to 80% loan-to-value (LTV) ratios. That’s a significant decrease and nearly half a point lower than just a few months ago.

What’s Next?

Looking ahead, it’s a bit uncertain. The Federal Reserve is likely to increase rates by a quarter-point in September, and they’re talking about a few more hikes before the year ends. However, DSCR rates are based on a 5-year term rather than a 10-year, so they may fluctuate differently. However, by the end of the year, we could see these rates dip into the low sixes and possibly even the high fives early next year.

Conventional Rates: A Better Time for Buyers

Why should you care about conventional rates? Well, they’re crucial because they determine what your end buyers can afford. Right now, we’re seeing rates in the high fives and are around 5.625% to 5.75% for those with excellent credit and strong LTVs on owner-occupied properties.

Looking Forward

If the Fed continues to drop rates, we could see conventional rates fall into the low fives by the end of the year or early next year. While I don’t expect rates to drop more than a point or point and a half in the next 12 months, even these modest decreases will make a big difference. More buyers in the market mean more opportunities to sell your properties and move on to the next deal.

Fix-and-Flip Loans: Trending Downward

Now, let’s talk fix-and-flip loans. If you’ve got experience, which is 10 or more projects under your belt in the last two to three years, then you’re in luck. Rates for seasoned investors are now dipping back into the 8% range. Even better, we’re seeing lenders offer 10% down and 100% financing options, depending on your credit score.

What to Expect

This trend of decreasing rates is likely to continue, with some lenders already offering rates below 10% and even into the 8% range for well-qualified investors. Don’t expect huge changes by the end of the year, though. We might see another quarter or half-point drop, but this new reality of lower rates is here to stay, at least for the next 6 to 9 months.

The Bottom Line

So, what’s the takeaway? Rates are trending down across the board. That’s great news for cash flow, affordability, and getting your properties sold. The past year has been tough with high rates, but the tide is turning. More buyers are entering the market, properties are starting to cash flow again, and there’s a lot more activity overall.

Stay Updated with Our Mortgage Report

Want to keep up with where rates are headed? We’ve got a mortgage report that tracks the trends and tells you who’s offering the best rates for fix-and-flip, DSCR, and other loan products. Watch our most recent video to find out more about Real Estate Market Update for Investors – September 2024