Cycles in Real Estate

The cycle between boom and bust in the real estate market is something most people have heard about at least once when discussing this topic. It’s no secret that real estate can be a volatile place to work, with the Great Recession’s shadow still looming even after this relatively steady recovery. In the same way that the overall real estate market goes through cycles, specific sectors within real estate can experience their own booms and busts.

A good example of this “micro” boom and bust is something we’re seeing in our experience as hard money lenders. A few years ago, closer to the Great Recession, home flips were the hottest way to invest for most of our borrowers and many of them made handsome profits. Thanks to Austin’s (and many other parts of Texas) relatively older population of homes, flips made sense. Lower barriers to entry and lower budgets made it possible for the average home investor to consider flips more seriously.

This trend continued until parts of the state started to run low on housing inventory. Now, we’re starting to see new construction picking up in greater numbers, with further distances on projects as urban sprawl continues to expand and push suburbs further from the metros that anchor them. With the increase in construction, naturally flips as a section of the home building market are declining.

These trends usually have a shorter time frame than long term cycles, which allows a hard money lender like Loan Ranger Capital ample time to adjust our trajectory to better fit the environment. It gives us more time to serve our customers and help make their projects a success, no matter what it is!

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