Dear Investors and Partners,

Mortgage rates in the US have been gradually declining, dropping 35 basis points since May 1st, from 7.22% to 6.87%. This decrease in mortgage rates, combined with an improving housing supply, is beneficial for the housing market. However, it remains uncertain whether the Federal Reserve will interpret this as a sign of cooling general inflation and subsequently reduce interest rates.

The latest US Jobs report surprised the market, with the Department of Labor reporting 272,000 new jobs in May, which is 82,000 more than expected and higher than the monthly average of the past year. While these results enhance the economic outlook, they may complicate the Fed’s decision on a potential interest rate cut next week. Cutting rates too soon could trigger a rebound in inflation due to increased consumer demand amid strong economic activity, potentially undoing efforts to curb inflation.

High mortgage rates and other factors have made it difficult for families to purchase homes for some time, prompting market players to adapt their strategies. Developers are increasingly building new houses for rent, aiming to benefit from high home prices and mortgage rates that force many Americans to rent. In 2023, an estimated 93,000 new single-family rental homes were completed across the US, according to housing consulting firm John Burns Research and Consulting. This represents a 39% increase from 2022 and the highest number ever recorded in a single year. This rapid pace is expected to continue through this year before slowing by 2025. While rent growth has decelerated from its pandemic peaks, house rents remain higher than apartment rents, according to JBRC. Additionally, occupancy rates, which have been declining in multifamily buildings, have remained more stable in the rental-house sector, indicating sustained demand.

 

Rental builders are betting that the lowest level of home affordability since the 1980s will keep even relatively affluent Americans renting. They are squeezed by near-record home prices, mortgage rates above 7%, and other rising housing costs. In the first quarter of this year, construction began on approximately 18,000 single-family homes built for rent, a 20% increase compared to the first quarter of 2023, according to the National Association of Home Builders. Golden Bridge has financed several single-family and townhome rental projects and has observed this trend strengthening through our own work.

Focusing on inventory in the NYC market, the number of available rentals in New York City increased to 30,314 in April, nearly 5% higher than last April. While this is good news for prospective renters, it is still significantly lower than the 41,123 rentals available in April 2019, and it is insufficient to address a shortage that has been building for decades, according to a new report from StreetEasy.

Among the boroughs, Queens led with a 9.6% annual increase in rental inventory, reaching 4,046 listings, including 1,377 in Astoria, which saw a 47% rise. Brooklyn followed with an 8.7% increase to 9,838 rentals, with Greenpoint leading its neighborhoods with a 47% rise, representing 507 units. Manhattan’s listings increased by less than 1% to 4,400. In the Bronx, Mott Haven led all neighborhoods with an 85% increase in inventory due to a megaproject nearing completion along the Harlem River. Mott Haven’s inventory represents 42% of the total available apartments in the borough.

 

While these increases in inventory are noteworthy, limited supply and high demand have driven rent prices to soar in Brooklyn and Queens. In April, the median asking rent in Brooklyn increased by 4.5% year-over-year to $3,450, while in Queens, it jumped by 11.1% to $2,999. These rising rents reflect the intense competition among renters for the limited inventory in these two boroughs. Many projects are underway in Brooklyn and Queens, and Golden Bridge remains most active in issuing loans in these areas. The rising inventory in both boroughs has the potential to slow rent growth but, Half of the neighborhoods experiencing the largest increases in rental listings are in Brooklyn and Queens.

 

Erez Britt, Founder and CEO

 

See below links to Golden Bridge and to our new fund fact sheets:

Example of loan:

Address: Centre Island Road, Oyster Bay, NY

Golden Bridge recently issued a $900,000 loan to finance the acquisition of a single-family home on a 3-acre lot on the exclusive Centre Island off Oyster Bay. This loan was granted to a group of borrowers who specialize in acquiring properties in prestigious locations and transforming them into luxury single-family homes. This group recently completed flipping a townhouse in Midtown Manhattan, repaying their loan to Golden Bridge earlier than expected. The 47,000-square-foot home includes 6 bedrooms, 4 full bathrooms, 1 half bath, and a guest house on the property. Centre Island, covering only 2 square kilometers, is home to notable residents such as Billy Joel and Rupert Murdoch. We see great potential in financing this project due to its prime location and our confidence in the borrowers.

 

Loan Amount: $ 900,000

Property Value (As Is): $ 1,500,000

LTV As Is (loan to property value ratio): 60%

Loan Term: 12 Months

 

Reminder that it is possible to see the fund’s loans on New York City’s website:

https://a836-acris.nyc.gov/DS/DocumentsSearch/PartyName

(Business party name: Golden Bridge)

For additional information, don’t hesitate to contact us.