REI INK

No End in Sight for the Housing Shortage, New Western Investor Survey Finds

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Due to the lack of inventory, 80 percent of surveyed investors are selling homes at or above asking price  New Western, the largest national private real estate investment marketplace, released a survey and report on single family real estate investor sentiment in the United States and the company’s top growing markets right now. Approximately 60 percent of survey respondents believe the U.S. is in a housing shortage. As a result, 80 percent of the surveyed investors are selling homes at or above asking price after renovating the properties to make them habitable. From Q1 2023 to Q2 2023, New Western saw double digit growth in over a dozen markets, including: Other notable markets that grew from Q1 2023 to Q2 2023 are Atlanta and Dallas. As New Western investor activity grew across these markets, the retail market saw a decrease of 40 percent or more according to Redfin data, showcasing how investors are bullish on finding opportunities despite negative market sentiment. Approximately 55 percent of survey respondents said location/neighborhood is most important to their buyers. As consumers look to find more housing options, investors are delivering much needed supply back to the market. On average, homes purchased through New Western that are later renovated sell for 31 percent less than new traditional homes for sale in the same market. “Investor sentiment is positive right now as they haven’t let the macroeconomic environment slow them down,” said Kurt Carlton, co-founder and president of New Western. “The U.S. is lacking about 320,000 listings valued at the affordable range for middle-income buyers. These investors see the housing shortage as an opportunity to deliver homes for buyers where the payoff is larger than the profits.” The National Association of Homebuilders projects the construction of 830,000 homes this year, but what goes unnoticed is the expected 350,000 home flips involving vacant and uninhabitable properties revitalized by independent rehabbers. These rehabbers are stepping in to address scalability challenges and fill the gaps in individual markets, driven by demand. For the remainder of 2023, investors are confident in the residential real estate market; about 70 percent of respondents plan to invest in one to three properties and 75 percent saw business growth from the second half of 2022 to date. “Clearly, the survey shows that the housing dynamics have changed in the mind of some investors. New listing data is trending at all-time lows; active inventory growth has been so slow in 2023 that we will see some negative year-over-year prints soon in the weekly inventory data. Also, housing demand stabilized from its waterfall collapse in 2022. In this environment, the opportunity to fill in the need due to the housing shortage is being tackled by investors. Also, this is all happening with higher rates; if rates fall in this environment, demand has nowhere to go but up from such low levels,” said Logan Mohtashami, housing data analyst and financial writer at HousingWire. The survey and report, titled “The Flip Side 2.0: An Outlook for Residential Real Estate Investing in 2023,” is an analysis from insight based on both New Western sales data as well as opinion polling in May and June 2023 from over 1,350 of its real estate investors ages 18 and up from around the U.S. who have previously purchased property through New Western or plan to in the future. A majority of the survey respondents are ages 26 to 57. Specifically, around 30 percent are ages 26 to 41, just over 40 percent are ages 42 to 57 and approximately 15 percent of respondents are 58 to 67. A little over 70 percent of respondents invest in the Southwest and Southeast regions of the U.S. Additionally, roughly 70 percent of respondents fund their investments through hard money or investment financing and about 30 percent through cash. For more information about New Western, please visit https://www.newwestern.com. About New Western New Western is a real estate investment marketplace that makes investing more accessible for more people. Operating in most major cities, our marketplace connects more than 150,000 local investors looking to rehab houses with sellers. As the largest private source of investment properties in the nation, we buy a home every 13 minutes. New Western delivers new opportunity for all—a fresh start for sellers, exclusive inventory for investors, and in doing so, creates housing that is more affordable for buyers. New Western was honored with a Glassdoor Employees’ Choice Award in the U.S. small and medium company category, recognizing the Best Places to Work in 2023.

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Invest in Yourself and Take the Deal 

Lori Greymont is a real estate investor, developer, and TV host. She has an impressive track record in the real estate industry, having invested in, developed, bought, and sold over 2,000 properties. In today’s episode, Lori emphasizes the importance of connecting and engaging with people in real estate and highlights the value of knowing your “why” as an investor. Listen to this episode and learn how Lori leverages her extensive network, fosters partnerships, and believes in herself to achieve remarkable results! Quotables “I wanted the deal presenters to fight over the money because that’s reality” “When you get really clear that you have the value to offer, the impact to make, nothing stops you.” “Believe in yourself. Whether you’re male or female, you’re only going to go as far as what you believe you’re worth.” Links LinkedIn: Lori Greymont https://www.linkedin.com/in/lorigreym… Website: RCN Capital https://www.rcncapital.com/podcast Website: REI INK https://rei-ink.com/

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Black Knight: Past-Due Mortgages Approach Recent Record Lows

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Serious Delinquencies Continue Improvement; Prepayments See Seasonal Rise Black Knight, Inc. reports the following “first look” at May 2023 month-end mortgage performance statistics derived from its loan-level database representing the majority of the national mortgage market. Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 3.10%Month-over-month change: -6.25%Year-over-year change: -2.62% Total U.S. foreclosure pre-sale inventory rate: 0.43%Month-over-month change: -2.03%Year-over-year change: 2.02% Total U.S. foreclosure starts: 25,400       Month-over-month change 2.16%Year-over-year change: -4.39% Monthly prepayment rate (SMM): 0.54%Month-over-month change: 23.12%Year-over-year change: -40.11% Foreclosure sales: 6,800Month-over-month change: 5.50%Year-over-year change: 18.95% Number of properties that are 30 or more days past due, but not in foreclosure: 1,639,000Month-over-month change: -107,000Year-over-year change: -20,000 Number of properties that are 90 or more days past due, but not in foreclosure: 483,000Month-over-month change: -18,000Year-over-year change: -203,000 Number of properties in foreclosure pre-sale inventory: 229,000Month-over-month change: -4,000Year-over-year change: 8,000 Number of properties that are 30 or more days past due or in foreclosure: 1,868,000Month-over-month change: -112,000Year-over-year change: -13,000 Top 5 States by Non-Current* Percentage Mississippi:                         7.34%Louisiana:                            6.78%Alabama:                             5.33%West Virginia                     4.87%Pennsylvania:                    4.84% Bottom 5 States by Non-Current* Percentage Oregon:                               2.09%Montana:                            2.02%Idaho:                                   2.01%Colorado:                            1.96%Washington:                      1.92% Top 5 States by 90+ Days Delinquent Percentage Mississippi:                         2.21%Louisiana:                            1.81%Alabama:                             1.55%Arkansas:                            1.34%Georgia:                               1.23% Top 5 States by 12-Month Change in Non-Current* PercentageAlaska:                                  -24.21%Connecticut:                      -15.19%Vermont:                            -12.33%New York:                           -11.87%North Dakota:                   -10.76%                                                                                Bottom 5 States by 12-Month Change in Non-Current* Percentage Idaho:                                   14.44%Utah:                                    6.09%Arizona                                 5.84%Michigan:                            5.62%Georgia:                               3.35%  SOURCE Black Knight, Inc.

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Redfin Report: The Spring 2023 Homebuying Season Never Happened

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Near-7% mortgage rates are preventing both would-be homebuyers and would-be sellers from entering the market. Construction of new single-family homes is near its highest level in almost two decades, providing some hope for an uptick in inventory by next year. As spring turns into summer, it’s official: The traditionally hot spring homebuying season didn’t come to fruition in 2023. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. This year, instead of the calendar determining the homebuying season, the Federal Reserve is dictating when people buy and sell. And so far, the Fed’s actions are suggesting they wait. Pending home sales fell 16% from a year earlier during the four weeks ending June 18. But even though sales are relatively tepid, Redfin’s Homebuyer Demand Index—a measure of requests for tours and other early-stage buying services from Redfin agents—is up 11% year over year. Additionally, there are more house hunters than there are homes hitting the market. New listings of homes for sale are down 24% from a year ago, and the total number of homes for sale is down 8%, the biggest drop in over a year. Elevated mortgage rates are responsible for the drops on both the demand and supply sides. With average rates sitting above 6% all spring, pushing the typical U.S. monthly housing payment up near record highs, many would-be buyers are sitting on the sidelines, waiting for rates to come down. And the buyers who are out there are having a hard time finding listings, with many prospective sellers staying put, hanging onto their relatively low rates: Nearly all homeowners with a mortgage have a rate below 6%. The continuing inventory shortage is bolstering home prices. The median U.S. home-sale price dropped just 1% year over year this week, the smallest decline in more than three months. On a local level, prices have started leveling off: They fell in 25 of the 50 most populous metros, compared with 29 a month ago. In San Jose, CA, for instance, the median sale price is up roughly 2% year over year, marking the first increase after eight straight months of declines. “There are two things that would jumpstart the housing market: A big drop in mortgage rates and/or a big surge of new listings,” said Redfin Deputy Chief Economist Taylor Marr. “Neither of those things happened this spring; instead, rates rose and new listings dropped to record lows. And with one or two more interest-rate hikes expected this year, mortgage rates are likely to remain elevated at least through the summer, continuing to limit both demand and supply.” “But even though there wasn’t much of a spring homebuying season this year, there was a spring building season,” Marr continued. “That means there’s hope for more listings somewhat soon, with homebuilders working to fill the inventory bucket. Builders broke ground on more single-family homes in May than almost any month in nearly two decades, which could expand buyers’ options by the end of the year.” Leading indicators of homebuying activity: Key housing market takeaways for 400+ U.S. metro areas: Unless otherwise noted, this data covers the four-week period ending June 18. Redfin’s weekly housing market data goes back through 2015. For bullets that include metro-level breakdowns, Redfin analyzed the 50 most populous U.S. metros. Select metros may be excluded from time to time to ensure data accuracy. To view the full report, including charts, please visit: https://www.redfin.com/news/housing-market-update-spring-homebuying-season-never-happened

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Affordability crisis: United States needs 4.3 million more homes

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Gap between families and available homes widens and likely continues to grow A significant shortage of affordable housing options is fueling America’s affordability crisis, particularly for those looking to move out on their own for the first time, a new Zillow analysis shows. This huge housing deficit underscores the need for policies and investments that can boost construction. This lack of housing — especially affordable options — has left millions of households “missing.” These missing households consist mainly of individuals and families living in another family’s owned or rented home. Across the country in 2021, there were nearly 8 million missing households, compared to just 3.7 million housing units available for rent or sale, a deficit of 4.3 million homes. “The U.S. housing market is like a high-stakes version of the game musical chairs,” said Orphe Divounguy, senior economist at Zillow. “There are simply not enough homes for millions of people. Unless we address the shortage of smaller, more-affordable, starter-type homes, we risk leaving families without a seat — and it will only get worse over time.” For each of the 3.7 million housing units available for rent or sale across the country in 2021, there were more than two potential households — families likely in need of their own homes. This means even if every missing household was willing and able to move into their own home, 4.3 million households would have been left without a place to move to. The bulk of families doubling up have consistently lower incomes, highlighting the need for smaller, more affordable housing. Of the families that are doubling up, 68% had an annual income of $35,000 or less. The mismatch between potential housing needs and available homes across the country is playing out in dramatic fashion in the most expensive coastal housing markets, such as Los Angeles, San Francisco, San Jose, San Diego and Boston but also in places like Boise. What policymakers can doConstruction productivity has been declining relative to the rest of the U.S. economy since the late 1960s, with land-use restrictions, building approval delays, and stunted construction sector growth all contributing to the lack of new home construction across the country. Policymakers should explore ways to boost production and overall growth of the construction sector to ensure housing supply can catch up to demand. Additionally, experts are near unanimous that loosening restrictive zoning laws is critical to creating more supply and easing housing costs. According to public polling conducted by Zillow, four out of five adults support allowing more, smaller home types to be built in their own neighborhoods. Researchers also suggest that speeding up building permitting, eliminating parking requirements, tax incentives to rehabilitate underutilized housing stock, and expanding affordable housing trust funds could all help ease the shortfall in new construction. SOURCE Zillow

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HOME FLIPPING ACTIVITY REMAINS HIGH ACROSS NATION AS INVESTOR PROFITS SHOW SIGNS OF IMPROVING IN FIRST QUARTER OF 2023

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Flipping Rate Across U.S. Rises Close to High Point This Century; Typical Profit Margins Inch Up but Still Near Lowest Level Since 2000; Raw Profits Remain Near 10-Year Low ATTOM, a leading curator of land, property, and real estate data, released its first-quarter 2023 U.S. Home Flipping Report showing that 72,960 single-family homes and condominiums in the United States were flipped in the first quarter. Those transactions represented 9 percent of all sales. The latest portion was down from 9.4 percent of all home sales in the nation during the first quarter of 2022. But it was still up from 8 percent in the fourth quarter of last year, hitting the second-highest level this century. The report also revealed that while flipping activity rose, mixed trends emerged for raw profits and profit margins. Profits and investment returns both increased slightly from the fourth quarter of 2022 to the first quarter of this year. But both also remained near low points over the past decade, reflecting ongoing financial struggles for home flippers. The quarterly gain in the typical profit margin, of 22 percent, represented a modest reversal of fortune for investors following three years of nearly continuous declines that began well before a slowdown in the broader U.S. housing market last year. “Home-flipping investors across the U.S. may have finally halted the decline,” said Rob Barber, CEO of ATTOM. “In the first quarter, profit margins showed a slight upward turn after an extended slump, while interest in flipped homes continued to rise among buyers. However, investors shouldn’t assume they’re out of the woods just yet. Home-flipping carrying costs can easily erase a 22 percent return on gross profits, and it’s possible that the recent gain is merely a temporary blip. Nevertheless, the first-quarter trends offer some hope for investors indicating that brighter times may lie ahead.”  Among flips nationwide, the gross profit on typical transactions (the difference between the median purchase price paid by investors and the median resale price) increased to $56,000 in the first quarter of 2023. That remained down 20 percent from $70,000 in the first quarter of 2022 and still stood at one of the lowest points since the U.S. housing market began recovering in 2012 from the Great Recession that struck in the late 2000s. Nevertheless, the total profit of typical flips nationwide was up 4.7 percent from $53,500 in the fourth quarter of 2022. Typical profit margins, meanwhile, also ticked up during the first few months of this year, after falling in eight of the prior nine quarters. The typical gross flipping profit of $56,000 in the first quarter of 2023 translated into a 22.5 percent return on investment compared to the original acquisition price. While the typical margin remained down from 26.9 percent in the first quarter of 2022 – and was still less than half of the 51.5 percent level recorded in the middle of 2020 – it inched up from 21.7 percent in the fourth quarter of last year. Profits and profit margins turned around a bit in the first quarter of 2023 as median resale prices on flipped homes went up slightly faster than they were rising when investors were buying homes. Specifically, in the first quarter of 2023, the typical resale price on flipped homes increased 1.7 percent, from $300,000 in the fourth quarter of 2022 to $305,000 in the first quarter of this year. That was better than the 1 percent increase in the median price that recent home flippers were commonly seeing when they originally bought their properties. The recent profit turnaround – modest as it was – continued an unusual pattern of home flipping fortunes running counter to the broader U.S. housing market. For the prior three years, investment returns were mostly dropping. That was happening despite prices and profits for traditional sellers soaring during an extended, decade-long boom period for the overall market. Investor woes continued last year as the market surge stalled amid rising mortgage rates, high consumer price inflation, a faltering stock market and economic uncertainty. Home values have dropped throughout the country since the second quarter of last year, with the national median price down 7 percent. But flipping profits started to reverse course early this year, even as prices continued to dip in most of the country. Home flipping rates rise in three-quarters of nation Home flips as a portion of all home sales increased from the fourth quarter of 2022 to the first quarter of 2023 in 128 of the 172 metropolitan statistical areas around the U.S. with enough data to analyze (74 percent). The increases were mostly by less than two percentage points. (Metro areas were included if they had a population of 200,000 or more and at least 50 home flips in the first quarter of 2023). Among those metros, the largest flipping rates during the first quarter of 2023 were in Macon, GA (flips comprised 16.8 percent of all home sales); Atlanta, GA (15.3 percent); Jacksonville, FL (15.2 percent); Memphis, TN (14.4 percent) and Clarksville, TN (14.3 percent). Aside from Atlanta, Jacksonville and Memphis, the largest flipping rates among metro areas with a population of more than 1 million were in Phoenix, AZ (13.9 percent) and Charlotte, NC (13.2 percent). The smallest home-flipping rates among metro areas analyzed in the first quarter were in Indianapolis, IN (4 percent); Wichita, KS (5 percent); Bridgeport, CT (5 percent); Madison, WI (5.2 percent) and South Bend, IN (5.3 percent). Typical home flipping returns up quarterly in over half the nation The median $305,000 resale price of homes flipped nationwide in the first quarter of 2023 generated a gross profit of $56,000 above the median investor purchase price of $249,000. That resulted in a typical 22.5 percent profit margin, up from 21.7 percent in the fourth quarter of 2022. Profit margins went up quarterly in 103 of the 172 metro areas analyzed (60 percent), although they were still below levels from the first quarter of 2022 in 132, or 77 percent, of

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