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State of the Florida Private Lending Market

Since the onset of Covid-19, only a handful of commercial banks are still lending on mid-size construction projects in South Florida. As the pandemic swept the nation, South Florida lenders slowed or halted construction financing.

This further staunched a development wave that had already begun to ebb. COVID’s impact on brick-and-mortar retail and hospitality brought a full stop to plans for many new shopping centers and hotels; the shift to remote working left banks and other firms wary of new office projects.

In this reactionary market, commercial lenders have implemented stringent requirements and stress tests, which have made lenders acutely aware of their need to manage risks. An expected result is the wide opportunities for private lenders, family offices, and private funds in the real estate lending space.

Private Lenders are focusing on experience, particularly with borrowers that have been through market cycles to show that they have behavioral performance, or acted accordingly to whatever obligations that they had on financing circumstances.

Borrowers that come with a lot of experience generally know how to anticipate the risks that are inherent in development. Private lenders are able to understand that borrowers that know how to protect themselves as the investor automatically protect the lender at the same time.

Data Analysis of Florida Private Lending Market

The soaring South Florida housing market has been well documented. While starts on multifamily condo and rental projects were down significantly in the third quarter — with 2,055 units in 2020 down almost 38% from 2019 — they’ve picked up since October, according to Ned Murray, associate director of FIU’s Jorge M. Pérez Metropolitan Center. Construction starts already are set to be up about 30% in the fourth quarter of 2020 over the same period in 2019. More than half are in the city of Miami.

In the SFR market, sales volume and prices soared in October of 2020 as both grew by double digits across South Florida’s housing market, according to the Florida Realtors. Additionally, single-family home sales increased 24.4% to 4,800 in the region when compared to the same month year of year. The median sales price grew 17.8% to $424,250. Statewide, there was plenty of demand as well. Sales of single-family homes were up 26.9% while the median sales price increased 15.6% to $305,000.

As mentioned in our previous article that discusses the opportunities in the Florida Fix and Flip Market, investors are flocking to the Florida fix and flip space to take advantage of the astronomical demand. Private lenders have recognized the opportunity and have expanded and will continue to expand into the Florida market in the upcoming months.

If you are in need of an experienced real estate or private lending attorney to help you navigate your next transaction, the attorneys at the Law Offices of Lawrence Andelsman P.C. are here to help. Reach out to us today to see how we can partner together on your next loan. We are here to help guide you in the right direction.