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The Problem with Bank Lending

The Great Financial Crisis (GFC) of 2007 did several things to the housing market. “Too large to fail” banks that were lending to medium to large-sized builders, all but dismantled their construction lending departments, which meant funding dried up in a large way. The other side effect was many of the larger regional banks that were heavily concentrated in Construction Lending had asset values plummeting and eventually lost the battle to the FDIC being taken over and sold or liquidated. In addition (the trifecta), several large local and regional builders ended up losing the fight and went out of business along with speculative land developers. This caused a decade-long shortage of housing units being produced, an estimated three to five million homes short of current demand. 

Why America Needs Private Construction Lending

The State of Homebuilding Today

As we sit today, nearly 16 years after the GFC, very little has changed. The large banks haven’t come back, the speculative land developers haven’t come back in any measurable way, and local banks that were keeping private homebuilding alive, have now pulled back. The demand for housing is staggering, and there is not enough supply to correct the imbalance. Even with where interest rates are today, (a ten-year high), the demand is outpacing supply and the price to purchase a home has soared out of control.

America Needs More New Construction

Rising rates have not dampened demand which means lenders and builders cannot cut back on producing more homes. New construction is the answer and private homebuilders need to come back in a big way to balance out the housing supply for the future. 

New construction for private homebuilders

Why Private Homebuilders Are Key

Private homebuilding allows for more diversity in the density and types of housing being built in the community. It also allows for a much larger portion of the revenue earned on these homes to be put back into the community itself and supports new jobs, other store owners, local city tax revenue, and much, much more.

Private Lending Offers Creative Financing

Builders need creative financing to help them develop land and build houses based on their unique project. This is something banks cannot provide. They need a frictionless process, with people experienced who understand the “why” behind residential construction lending, home building and real estate development. They need a service team that knows how important it is to close a loan on time so they don’t lose earnest money, or fund a draw promptly so they can keep their subcontractors on the job and happy. Builders need people who genuinely care about their success, and that’s the team at Builders Capital.

Are you ready to get started? Contact us today.