Real Assets

Housing Desirability Remains Durable

Rajesh Agarwal

Senior Managing Director, Head of US Real Estate and Consumer Debt Strategies, Napier Park Global Capital

After falling steadily for most of the past 12 months, mortgage rates rebounded with the outbreak of the Iran war, sending the spring homebuying season off to a sluggish start. Though it slipped below 6% toward the end of February, the rate on 30-year fixed-rate mortgages ended the quarter at 6.47%, and this uptick combined with economic uncertainty appears to have weighed on housing market activity thus far in 2026.1

Despite the short-term ebb and flow of the housing market, we believe that secular tailwinds—such as undersupply of housing in the US and the ongoing need for capital to refurbish existing homes and to develop lots for new homes—remain intact. Housing market dynamics combined with the retreat of traditional banks from construction lending, in our view, have created a supportive backdrop for nonbank providers of capital to the real estate industry. This includes capital to finance residential transitional loans (RTLs)—short-duration, value-add renovation loans—and builder financing transactions—off-balance-sheet financing provided to homebuilders for the acquisition and development of entitled and permitted land.

 

In our view, housing market dynamics have created a supportive backdrop for nonbank providers of capital to the real estate industry.

Notably, RTLs are backed by hard assets whose values are transparent and subject to frequent validation through the sale of similar properties, limiting the potential for an abrupt markdown by lenders. We see significant opportunity to lend capital to experienced developers that can renovate homes within existing communities with desirable characteristics like top school districts, walkability and proximity to jobs, with a focus on markets that exhibit stronger-than-average household incomes, population growth and housing supply constraints relative to the broader US—attributes that, in our view, support more resilient demand and home values. We believe this reinforces the importance of distinguishing between the national “housing market” and a more localized “market of homes.”

1 Source: Freddie Mac; data as of March 31, 2026.

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