🏘️ Housing Shortages in 2026: What Investors Must Know About Financing 🔍

📉 The Housing Supply Crisis & Investor Loan Strategies You Need in 2026 💰

🏘️ Housing Shortages & Investor Financing – What’s Ahead

The U.S. housing market is entering 2026 with one unavoidable truth: we don’t have enough homes, and we won’t catch up anytime soon. With supply lagging far behind demand, investors are stepping into the gap—fueling rental growth, accelerating build-to-rent (BTR) activity, and reshaping mortgage financing trends.

As a mortgage brokerage with access to 600+ lenders, Medallion Funds is seeing firsthand how housing shortages are influencing investor loan structures, underwriting trends, and risk models. Here’s what today’s investors need to know.

1. The Housing Shortage Is Worsening—Not Improving

Despite new construction activity, the U.S. remains 3.2–4.5 million units undersupplied depending on the methodology used. Several factors are driving the gap:

• Delays in new construction pipelines
• High labor and materials costs
• Zoning restrictions limiting density
• Rising household formation and migration to Sunbelt states

Markets like Texas, Florida, Tennessee, and the Carolinas continue to absorb population growth fastest—keeping vacancy rates tight even with new supply coming online.

For investors, this environment creates long-term rental stability and strong absorption for well-located assets.

2. Why Housing Shortages Are Driving Investor Demand

When inventory is low, investors benefit in multiple ways:

• Higher rental demand – Renters stay longer because fewer homes are available.
• Stronger year-over-year rent growth in undersupplied submarkets.
• Faster lease-up for renovated or newly purchased properties.
• Increased appetite for build-to-rent and small multifamily investments.

Investors who understand these trends can secure properties before pricing resets upward again.

3. Financing Conditions Are Improving—But Not for Everyone

Mortgage rates are expected to gradually decline through 2026, but investor loans will still rely heavily on the lender’s risk appetite. The most commonly used loan types include:

• DSCR Loans

Ideal for rental investors, and now more flexible with:
– Lower DSCR thresholds (sometimes 0.85–1.0)
– Bank statement options
– Interest-only periods
– 30- and 40-year fixed terms

• Portfolio Rental Loans

Great for investors needing:
– Blanket financing (5–20 properties)
– Cross-collateralization
– Lower liquidity requirements
– Streamlined underwriting

• Bridge Loans

Critical during value-add rehab cycles when:
– Rent growth is projected
– Units need renovation
– Sellers won’t give large concessions

• Construction & Build-To-Rent Loans

High demand in undersupplied metros with population growth.

Medallion Funds is increasingly placing BTR developer financing as more investors build their own rental communities to bypass inventory shortages.

4. Underwriting Is Changing Because the Market Is Changing

Lenders are updating their risk models to reflect today’s shortages:

• Greater emphasis on rental comps in constrained submarkets
• More tolerance for lower DSCR when vacancy risk is minimal
• Stronger pricing incentives for long-term holds

The biggest opportunity?
Investors who can demonstrate stabilized income potential are getting superior rates and loan terms.

5. What Investors Should Do Now

To position yourself for the next 12–24 months:

1. Get pre-approved early – Competitive markets move fast.
2. Consider DSCR loans before rates reset downward and pricing increases.
3. Look at emerging markets near major job corridors (Katy, Fulshear, Richmond, Conroe, etc.).
4. Run full cash-flow scenarios with long-term hold assumptions.
5. Evaluate BTR or small multifamily as a hedge against low inventory.

The housing shortage is not a short-term story—it is a structural investment opportunity.

If you're planning to acquire, build, or refinance investment property, Medallion Funds can structure the right loan, from DSCR to BTR construction to portfolio financing.

Final Takeaway

Home supply will remain constrained for years. Investors who secure the right financing today will benefit from:

• Rising long-term rental demand
• Lower future refinance rates
• Consistent appreciation in high-growth markets

Smart financing—not timing—will determine who wins the next cycle.

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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory