Mortgage
Tourism States May Offer DSCR Mortgage Opportunities
By Real Estate Wire Staff, . Real Estate Wire.
Five states, all heavily dependent on tourism, now have more than a quarter of their housing stock classified as investment property, according to a second-quarter pulse report from BatchData, cited by National Mortgage News. Maine tops the list at 30.9%, followed by Wyoming at 30.6%, Alaska at 26.7%, Montana at 26.6% and Hawaii at 25.6%. North Carolina, Nevada and Arizona each came in above 24%.
BatchData researchers suggested many of these investor-owned homes are likely vacation homes or short-term rentals. "All of these states depend heavily on tourism, so it's likely that many of the investor-owned homes are vacation homes and short-term rental properties," the firm wrote in its report.
Nationally, roughly 15.9 million homes, equal to 18% of the U.S. housing stock, were held by individual or corporate investors at the close of the second quarter. By raw count, the biggest markets are in the Sun Belt: Texas leads with 1.4 million investor-owned properties, California follows at just under 1.2 million, and Florida sits just behind at 1.1 million.
Investor purchase volume told a more complicated story. Buyers acquired 284,068 homes in the second quarter, down 22% from 366,027 a year earlier. Quarter over quarter, purchases did edge up from roughly 277,394 in the first quarter, but that gain was outpaced by a broader surge in overall home sales. As a result, investors' share of all transactions fell to 26.7%, the smallest slice in five quarters. "While investor home purchases increased during the second quarter, they didn't keep pace with the much larger increase in overall home sales during April, May and June," said BatchData President Ivo Draginov.
The geographic data may offer clues to lenders looking to grow debt-service-coverage-ratio lending. A DSCR loan, a type of non-qualified mortgage, is underwritten on a property's rental income rather than the borrower's personal income.
The non-QM market is moving. Optimal Blue reported that DSCR loans made up one-third of all non-QM rate locks in the most recent month, and non-QM lock volume climbed 8% between August and September. Securitizations in the segment have already exceeded prior annual records, National Mortgage News noted, even as conventional purchase and refinance activity pulls back.
The practical read for lenders is that the high-concentration tourism states offer a concentrated pool of potential DSCR borrowers, but the raw volume opportunity remains in Texas, California and Florida, which have the largest numbers of investor-owned properties. A lender building a DSCR book has to decide whether to chase density, where the tourism states offer it, or scale, where the Sun Belt delivers it.
The National Mortgage News report does not say how many of those investor-owned properties carry existing financing that could be refinanced, or what share of vacation-home owners are actively seeking new debt. The 22% year-over-year drop in investor purchases also suggests that acquisition-driven origination is under pressure, which means the near-term DSCR opportunity may sit more in refinance and cash-out activity than in purchase loans. That distinction matters for pipeline planning, and it is the one the data does not yet answer.
Source: https://www.nationalmortgagenews.com/news/investment-property-hotspots-may-present-dscr-opportunity