Expert Insights: Assessing Today’s Landscape MABA MassachusettsRealEstate FirstTimeHomeBuyers MaBuyerAgent

Derrick Barker is Co-Founder and CEO of Nectar. He started buying real estate from his dorm room at Harvard. After Harvard, he spent three years trading complex securities at Goldman Sachs, while simultaneously building a 500-plus unit real estate portfolio in his hometown of Atlanta. He left Goldman Sachs to focus on real estate full-time, eventually growing his portfolio to more than 4,700 units and $400 million in asset value.

MortgagePoint had a chance to catch up with Derrick to discuss his start in the mortgage finance space, what attracted him to his chosen profession, and other trends that will shape the marketplace in 2025 and beyond.

Q: How did you first get your start in the industry? What attracted you to the mortgage finance space?

If you create more units than new households can absorb, prices go down. If you create fewer units than households can absorb, prices go up. To increase affordability, you have to increase supply. It’s purely a numbers game, and it takes four things to create housing. Labor, materials, land, and capital. If you increase one or all of these things, you increase the supply and alleviate affordability challenges.

For instance, there was a record amount of new multi-family supply hitting the market in 2023-2024 because of low interest rates (increased capital availability). That is why rent growth has slowed across the nation and slowed by the most in markets with the most supply relative to population.

At the same time, higher interest rates have dramatically slowed new construction starts (reduced capital availability). So once this current wave of new supply gets absorbed, there will be limited new competition coming online. Assuming household formation / demand stays the same, this will cause rents to rise again.

In order to sustainably correct the affordability crisis, you need to increase the supply of either capital, labor, materials or land. There are various public solutions that could increase the supply of land and labor and typically innovation and various other dynamics impact materials. But the primary driver is capital.

To address capital, you have to either make financing more available or more flexible. This is what Nectar does in a creative way that works in both up and down markets. I would note that the government also subsidizes housing at every level and price point and will have a role to play in dealing with the crisis.

Q: What suggestions do you have for renters who are on the outside of the home buying market looking in?

For renters looking to eventually buy, I would suggest a few things:

• Focus on building savings and improving credit scores. Even small improvements in credit can make a significant difference in mortgage terms.

• Investigate first-time homebuyer programs and alternative financing options. There are many programs available that offer down payment assistance or more flexible qualification criteria.

• Consider buying in emerging neighborhoods or slightly further out suburbs where prices may be more affordable.

• Be patient and prepared. The market goes through cycles, so there may be better buying opportunities in the future. Use this time to get financially ready.

• Do not feel pressured to buy if the deal does not make financial sense. Sometimes renting is the better option, especially if it allows you to save and invest for the future.

Q: What course do you feel that rates will take as we prepare to enter 2025?

I don’t anticipate rate cuts. Rates will stay around here unless economic conditions deteriorate.

Q: Do you see a shift in housing policies based on the outcome of the Presidential Election?

Regardless of the election outcome, I expect housing affordability to be a key issue for a long time to come as neither party had a plan that addressed the scale of our current problem.

The Republicans mentioned a focus on reducing regulations to spur private sector development and expanding opportunities for homeownership through tax incentives or reforms to lending practices.

It is important to note that the federal government already does much of what each candidate had proposed, and while expanding on existing programs will certainly help, current proposals are unlikely to close the housing supply/demand mismatch in full. Many of the most impactful housing policies are implemented at state and local levels. Zoning laws, building regulations, and local incentives for housing development will continue to play a crucial role in addressing housing challenges across the country.

Q: What tools do you feel a mortgage professional needs to survive and thrive in today’s marketplace?

To thrive in today’s mortgage finance marketplace, professionals need:

• Strong technology platforms for efficient underwriting, loan processing, and portfolio management.

• Data analytics capabilities to make informed lending decisions and identify market opportunities.

• Flexible capital sources to offer competitive products in different market conditions.

• Deep understanding of regulatory requirements and compliance best practices.

• Strong relationships with real estate operators, brokers, and other industry players.

• Ability to structure creative financing solutions from multiple capital sources tailored to borrowers’ needs.

• Continued education to stay current on market trends, new financing tools, and evolving regulations.

Q: What advice would you give to anyone looking to break into the mortgage finance industry today?

For those looking to break into mortgage finance today, I would offer this advice … start by determining a niche where you can provide value to borrowers that the market is not currently providing. Fortunately, the market is vast and there are many inefficiencies. I would start by finding out how you can source or structure deals better than current incumbents.

Embrace technology, especially artificial intelligence (AI), as the industry evolves rapidly. Being able to use it to streamline your workflow, strengthen your underwriting and save time, yours, and your staff’s, is golden. If you are not familiar with it, take a class to bring yourself up to speed and hire an expert to help you implement it.

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