Alternatives

A Market of Homes

Rajesh Agarwal

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

Lower mortgage rates and slowing price growth have supported momentum for both new- and existing-home sales in the US.1 New-home sales activity has been bolstered by easing mortgage rates and ongoing homebuilder incentives, illustrating both the pent-up demand for housing and the commitment of homebuilders to support the market.2 Existing-home sales, which account for the vast majority of US housing market activity, have also picked up but remain well below historical trends.3

The combination of sluggish existing home sales and homebuilder incentives has also narrowed the historical price premium of new homes relative to existing homes. This has been a drag on transitional lending activity, which has declined to 6.8% of total home sales from a peak of 8.6% in 2022.4 We believe this highlights the importance of distinguishing between a “market of homes” and the “housing market”—which is to say that the sluggishness of existing-home sales at the national level doesn’t mean that move-in ready, well-priced homes in desirable neighborhoods are going to sell slowly.

Structural tailwinds remain intact, however, and we expect the demand for renovation capital to persist given that the median age of owner-occupied homes is 41 years.5 Many of the homes that do change hands are in need of renovation; we see significant opportunity to lend capital to experienced developers that can renovate homes within supply-constrained existing communities, which are frequently selling at attractive price points relative to new homes and has the potential for solid profit margins.

1US Census Bureau; data as of January 13, 2026.
2Source: National Association of Realtors; data as of January 14, 2026.
3Source: Freddie Mac; data as of December 31, 2025.
4Source: ATTOM; data as of December 18, 2025.
5Source: National Association of Homebuilders, American Community Survey; data as of April 8, 2025 (most recent available).

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All investments involve the risk of loss of principal.

Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur.

Alternative investments can be speculative and are not suitable for all investors. Investing in alternative investments is only intended for experienced and sophisticated investors who are willing and able to bear the high economic risks associated with such an investment. Investors should carefully review and consider potential risks before investing. Certain of these risks include:

  • Loss of all or a substantial portion of the investment;
  • Lack of liquidity in that there may be no secondary market or interest in the strategy and none is expected to develop;
  • Volatility of returns;
  • Interest rate risk;
  • Restrictions on transferring interests in a private investment strategy;
  • Potential lack of diversification and resulting higher risk due to concentration within one or more sectors, industries, countries or regions;
  • Absence of information regarding valuations and pricing;
  • Complex tax structures and delays in tax reporting;
  • Less regulation and higher fees than mutual funds;
  • Use of leverage, which magnifies the potential for gain or loss on amounts invested and is generally considered a speculative investment technique and increases the risks associated with investing in the strategy;
  • Carried interest, which may cause the strategy to make more speculative, higher risk investments than would be the case in absence of such arrangements; and
  • Below-investment-grade loans, which may default and adversely affect returns.

Residential transitional loans (RTLs) are short-term loans to real estate developers for the purpose of renovating a residential property. The loans are secured by the property being renovated.

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