There is no doubt that capital markets have tightened in the face of the Coronavirus pandemic. While there remains access to funding, the funding requirements have changed. For real estate investors, that means that funders are offering lower LTVs and requiring higher credit scores to offset the volatility and risk that has been introduced into the financial markets. Pimlico Capital has followed suit and tweaked its lending criteria to offset risk.
Our local real estate market is uniquely positioned to weather the pandemic better than others. First, the DC Metro Area has the benefit of approximately one-quarter of its jobs being provided directly or indirectly by the federal government, such that job security is improved. Second, Baltimore City boasts relatively affordable housing.
The nimble and savvy real estate investor can see the opportunities amidst the challenges. Warren Buffet famously counseled, “Be fearful when others are greedy and greedy when others are fearful.” To that end, anecdotal evidence supports the notion that there remain opportunities to be mined in the realm of real estate investment. If a homeowner was looking to downsize prior to the pandemic, they presumably still are. And if a family was feeling cramped in their current home prior to the pandemic, they assuredly are feeling even more so now. Also, there may be opportunities for buyers to look for homes with less competition. Finally, financial uncertainty may lead renters to continue to rent versus buy—a boon for real estate investors.
At Pimlico Capital, our phone continues to ring with borrowers seeking real estate financing. The conversations are different these days and sometimes difficult; our lending criteria is certainly more conservative for the time being. But we’re lending, and optimistic about the local market in particular—especially housing in the $150-$300K range.
