2024 – Page 22

Inventory Peaks at Highest Levels Since COVID, Latest HouseCanary Report Shows

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A Seller’s Market Environment Continues to be Evident in the Housing Market, but Neutralization is on the Horizon with Inventory Levels Continuing to Rise Presumed September Interest Rate Cuts Is Anticipated to Free Buyers and Sellers from Previous Holding Patterns HouseCanary, Inc. (“HouseCanary”), a national brokerage known for its innovation and accuracy of real estate information, released its August Market Pulse Report, finding that inventory remains low from a historical perspective, however, it is now at the highest level since Covid. HouseCanary previously reported that inventory levels were gradually approaching pre-Covid levels, and this sentiment remained unchanged in August as total inventory increased 28.7% from the same period last year. Additionally, contract volume in August 2024 across all price tiers increased compared to August 2023, suggesting a steadier housing market and evidence of demand from potential homebuyers, further demonstrating a seller’s market. Jeremy Sicklick, Co-Founder and Chief Executive Officer of HouseCanary, commented: “The past couple of years have seen a housing shortage nationwide. However, consistent with what we have seen throughout this summer, there have been signs pointing to normalization in the housing market since the pandemic when looking at inventory levels, pricing and contract volumes from a multiyear perspective. Notably, total inventory is up 28.7% from the same period in 2023, and up 9.3% from 2022, indicating improvements in the pool of available properties and an eventual neutralization of the housing market. As we forecast for the back half of the year, we can expect the Fed to begin cutting interest rates at the next FOMC meeting after Powell’s remarks in Jackson Hole. If realized, we can anticipate increased contract volume during the fall season, should demand from prospective buyers remain persistent. Buyers and Sellers who have been sidelined from the market could just about be ready to get back in the game.” Key Takeaways: Source: HouseCanary

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Residential Loans Surge 23 Percent Quarterly, Climbing Back to Levels from a Year Earlier; Purchase, Refinance and Home-Equity Lending All Increase; Despite Shift, Lending Activity Still Off Nearly Two-Thirds from 2021 Peak ATTOM, a leading curator of land, property, and real estate data, released its second-quarter 2024 U.S. Residential Property Mortgage Origination Report, which shows that 1.62 million mortgages secured by residential property (1 to 4 units) were issued in the United States during the second quarter, representing a 23.2 percent increase over the prior three-month period. The spike still left total residential lending activity down 1.6 percent from the second quarter of 2023 and 61.2 percent from a high point hit in 2021. But it marked the first gain in a year and boosted the number of residential loans back up close to the level from a year earlier. The rebound came amid a strong Spring home-buying season and mortgage interest rates that dipped downward after months of increases. The increase in overall lending resulted from improvements across all major categories of residential loans, especially for home buying. Purchase-loan activity jumped 32.7 percent quarterly, to about 783,000, refinance deals rose by 10.3 percent, to about 546,000, and home-equity credit lines shot up 26.5 percent, to about 286,000. Measured monetarily, lenders issued nearly $533 billion worth of residential mortgages in the second quarter of 2024. That was up 27.6 percent from the first quarter of 2024 and 1.1 percent from the second quarter of last year. The varying increases among different loan types boosted the share of residential mortgages for home purchases, while reducing the proportion of refinancing loans. Purchase loans remained the most common form of mortgages around the U.S. in early 2024, comprising almost half of all mortgages, followed by refinance packages and home-equity lending. “The mortgage industry got one of its biggest boosts in years during the second quarter, supported by a combination of the usual Springtime home-buyer demand coupled with more attractive mortgage rates,” said Rob Barber, CEO at ATTOM. “However, a cautionary note is warranted, as we shouldn’t read too much into one great quarter. A similar trend occurred last Spring, with lending dropping off significantly later in the year. But with interest rates settling down and projections for more cuts from the Federal Reserve over the coming months, it wouldn’t be surprising if business increased even more for lenders over the rest of 2024, or at least didn’t drop significantly.” Total lending recovers losses over the past year but remains well below peaksBanks and other lenders issued a total of 1,615,281 residential mortgages in the second quarter of 2024, up from 1,311,377 in first quarter of 2024. The latest total was still down slightly from 1,642,100 in the second quarter of 2023 and remained far behind a recent high point of 4,167,656 hit in the first quarter of 2021. But the recent gain mostly reversed three straight quarters of declines. A total of $532.7 billion was lent to home owners and buyers in the second quarter of this year. That was up from $417.4 billion in the prior quarter and from $526.8 billion in the second quarter of 2023, although still less than half the recent peak of $1.3 trillion in 2021. Overall lending activity followed a similar pattern at the metropolitan area level. The total rose from the first quarter to the second quarter of this year in 201, or 98 percent, of the 205 metropolitan statistical areas around the U.S. that had a population of 200,000 or more and at least 1,000 total residential mortgages issued from April through June of 2024. But it remained down from the second quarter of 2023 in 118, or 58 percent, of the metro areas analyzed. The largest quarterly increases were in Boulder, CO (total lending up 106.5 percent from the first quarter of 2024 to the second quarter of 2024); Honolulu, HI (up 100.2 percent); Appleton, WI (up 63.1 percent); Sioux Falls, SD (up 56.8 percent) and Champaign, IL (up 54.7 percent). Aside from Honolulu, metro areas with a population of least 1 million that had the biggest increases in total loans from the first to the second quarter of 2024 were San Jose, CA (up 46 percent); Minneapolis MN (up 44.3 percent); Indianapolis, IN (up 42.3 percent) and Boston, MA (up 35.4 percent). The only metro areas with enough data to analyze where lending went down quarterly were Pensacola, FL (down 19.8 percent); Buffalo, NY (down 16.1 percent); Atlantic City, NJ (down 2.4 percent) and Springfield, IL (down 1.7 percent) Measured annually, the largest declines in total lending among metro areas with a population of at least 1 million were in San Antonio, TX (total lending down 19.1 percent from the second quarter of 2023 to the second quarter of 2024); St. Louis, MO (down 14.9 percent); Austin, TX (down 13.9 percent); Dallas, TX (down 11.5 percent) and Buffalo, NY (down 11 percent). Purchase mortgages, also up quarterly but slightly down annually, remain top loan typeThe second-quarter purchase-loan total of 782,937 was up from 590,058 in the first quarter of 2024 while the $311 billion dollar volume of purchase loans was 39.2 percent higher than the $223.4 billion first-quarter level. But the total was off 7 percent from 841,984 a year earlier and remained 50 percent lower than a high point hit in the Spring of 2021. The dollar amount was still off by 2.2 percent from $318.1 billion in the second quarter of last year and 42 percent beneath the 2021 peak. Residential purchase-mortgage originations increased quarterly in 98 percent of the 205 metro areas in the report, while remaining down annually in 74 percent of those markets. The largest quarterly increases were in Wichita, KS (purchase loans up 183.5 percent from the first quarter of 2024 to the second quarter of 2024); Boulder, CO (up 148.8 percent); Honolulu, HI (up 143.5 percent); Indianapolis, IN (up 86.8 percent) and Fort Wayne, IN (up 82.8 percent). Aside from Honolulu and Indianapolis, the biggest quarterly increases in metro areas with a population of at least 1 million in the second quarter of 2024 came in San Jose, CA (up 68.5 percent); Boston, MA (up 65.9 percent) and Minneapolis, MN (up 60 percent). The top annual decreases in purchase lending in metro areas with a population of at least 1 million were in San Antonio, TX (down 32 percent from the second quarter of 2023 to the second quarter of 2024); Dallas, TX (down 24

ZVN Properties

by Carole VanSickle Ellis
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A Network of Consummate Professionals By Carole VanSickle Ellis When Deanna Alfredo, senior vice president of the ZVN Properties Inc.’s Single-Family Rental (SFR) division, thinks about how the company is evolving with the times and the industry, she can sum up one of the biggest changes with one word: email. The ubiquitous electronic mail communications upon which most of the world has relied for several decades when it comes to communicating quickly as easily about both professional and personal matters is, Alfredo notes, transitioning off centerstage in the SFR space, and it is doing so much more rapidly than many vendors, contractors, and even investors realize. ZVN, however, is ahead of the curve thanks to the company’s dedication to clear and effective communication with both clients and contractors in order to, as the company itself describes it, “provide high-quality service and accurate, on-time results [while] minimizing customer costs.” The advent of the service portal on the client side of the equation has not come without complications on the service side of SFR, Alfredo noted. Today, nearly every SFR provider has its own unique, customized portal designed with the needs of that company’s specific residents and investors in mind. As a result, contractors and other real estate-related service providers may flounder as they navigate a vast array of automated and AI-powered systems. This tough terrain, Alfredo said, is where ZVN really shines. “Nearly all of our clients have technology and portals in place today that require us to go into their systems [vs. the client using a ZVN-developed option] to submit results, photos, and invoices,” Alfredo explained. “That is a very different landscape from even just a few years ago, when most parties in the industry were still relying on email. It has made things very difficult for a lot of service providers, but for us, that is just part of the growth and maturation process of the industry.” Bryan Lysikowski, CEO and co-founder of ZVN, agreed, saying ZVN’s ability to navigate client portals and platforms rather than requiring clients to enter into a standardized ZVN option is one of the things that makes the company stand out in the field. “If you want to survive and thrive in today’s marketplace, you must be heavily technology-enabled,” Lysikowski said. “We are managing a network of professionals all leveraging elements including artificial intelligence, cost estimation tools, and many other technologies, so our clients can rely on us to communicate the status of any asset and also to react quickly to changes in the property.” Unafraid & Unintimidated by Technology in Any Industry ZVN combines cutting-edge technology from multiple industries and sectors in order to gain the best reaction times and results possible for their clients, even if that means diving into industries that might appear to have little to do with real estate on the surface. For example, when temperatures skyrocketed in Texas earlier this year, ZVN leveraged meteorological data and forecasting information in order to prepare for action despite the events occurring over a holiday weekend. “We leverage technology that tells us what regions are likely to be hit by storms or weather events, including extreme temperatures,” Alfredo explained. “We can see these things at a ZIP code level and be prepared to respond.” In the case of extremely high temperatures in Texas, ZVN reached out to their vendor management team, which Alfredo described as “robust,” and challenged the team to contact all ZVN AC vendors in the potentially affected areas in order to assemble a list of at least three names per service region that would be willing to operate on a 24-hour rotation of availability over the long weekend. When units failed under the pressure of the sky-high temperatures, ZVN clients were able to provide fast, effective maintenance to residents who desperately needed access to cooler temperatures. “We went into that weekend knowing that if things went wrong (and they did for many residents), our partnerships with clients, vendors, and residents would effectively get us all through that,” Alfredo said. “We went in with a ‘crystal ball,’ but it took planning and communication to make sure we were all on the same page.” Lysikowski added each client file has a comprehensive asset list indicating where properties are located and what types of events might affect them. “When things like tornadoes happen, we get a ZIP-code level indicator that we can run through a portfolio to let us know what areas are likely affected by the event. This enables us to provide a fast and accurate response. Such a response might include emergency inspections for properties in the affected ZIP codes to check on residents or visual checks on vacant properties,” he said. “A lot of these potential issues are particularly hard on the elderly and families with children, so we make it a policy to always treat these issues with a sense of urgency,” Alfredo concluded. A History of Evolution & Customized Customer Service When Lysikowski founded ZVN just over 20 years ago, he did so in response to the “wild west” element of asset management preceding and during the housing crisis of the mid-2000s. ZVN started out in default services, striving to create order from the chaos that ensued as high volumes of properties plummeted into REO status and, eventually, institutional ownership. “It has been a very interesting journey over the last 20 years,” Lysikowski said. “No matter what area of real estate field services you are in — fixing properties, maintaining them, cutting the grass, etc. — there has been a parallel growth of the SFR industry and that service genre as all the volume hit [the sector].” He described a burgeoning need for services like ZVN, which considers itself a “one-stop-shop” for real estate services, and the emerging demand for centralized, professional, technology-savvy companies to manage services on a national level. “When we entered the industry, there was not a lot of regulation surrounding what we did,” he noted. “Fast-forward 18 years, and you had all

Gatlinburg, Tennessee

by Carole VanSickle Ellis
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“The Gateway to the Great Smoky Mountains” Attracts Visitors & Investors By Carole VanSickle Ellis Gatlinburg, Tennessee, has always been an attractive destination. Hundreds of years before the city was settled in 1806 as the settlement White Oaks Flats, Native American tribes traversed the area regularly as they hunted up and down the peaks and valleys of the mountain range we know today as the Great Smoky Mountains. Gatlinburg would have been founded three years earlier, but the original settler, a South Carolinian named William Ogle, died of malaria after prepping enough logs to build a cabin and then returning to his native state for the winter. Three years later, his widow and her remaining family returned to the area and assembled the cabin Ogle had left behind him in what is, today, the heart of Gatlinburg. In the wake of the American Revolution, the area around Gatlinburg attracted veterans from both that war and the War of 1812 who were eager to convert their war pay, 50-acre deeds for U.S. land, and become landowners in the beautiful and fruitful area that Ogle had dubbed “The Land of Paradise.” Many of their descendants make up the roughly 3,600 permanent residents of Gatlinburg today. Although fewer than 4,000 people live in Gatlinburg proper, which is often referred to as “The Gateway to the Great Smoky Mountains,” roughly 12 million people visit Sevier County, where Gatlinburg is located, each year. The area attracts tourists during every season thanks to a host of activities for history buffs, skiers of all levels, and nature lovers who want to visit the Great Smoky Mountains National Park or enjoy a vast array of activities designed to highlight different recreational elements in the region. “With the formation of the Great Smoky Mountains National Park [in 1945], tourism began to boost the area’s economy,” explained the Gatlinburg Convention & Visitors Bureau on their official Gatlinburg timeline. The group continued, “[Gatlinburg] has since developed into a four-season resort and convention setting.” The area is home to many artists’ communities thanks to investments around the same time into the Arrowmont School of Arts and Crafts and Pi Beta Phi’s public school, the first of its kind in the area, which was founded in 1912 and dedicated to “practical and academic education” and “the rebirth of Appalachian culture through arts and crafts and the ‘cottage craft industry’ movement.” A “Land of Paradise” for the Short-Term Rental Investor Today, those 12 million annual visitors not only spend heavily in the area during their stays; they support a vast real estate sector dominated by short-term rental options. “The combination of low property taxes, easy accessibility, and a supportive community makes Gatlinburg an ideal destination for short-term rental property owners,” according to a 2023 report published by local brokerage Colonial Properties. According to short-term rental resource hub Chalet, average property taxes in Gatlinburg hover just over 2.5%, lower than both state and national averages, and local short-term rental regulations are relatively permissive. Gatlinburg does have regulations in place governing noise and occupancy, but short-term rentals are permitted in nearly all residential zoning districts. Furthermore, at present, the city does not limit the number of rental properties owned by any one person or business entities, nor does the city restrict length of stay for short-term renters. The average daily rate (ADR) in Gatlinburg is higher than $300, and seven-bedroom houses post ADRs of nearly $600. “The town’s proximity to the Great Smoky Mountains National Park ensures a constant influx of tourists, driving demand for short-term rentals,” wrote Mashvisor analysts earlier this year. “[Proximity to the park] has led to a 15% increase in rental income for vacation homes compared to the previous year,” they continued. At time of publication, Gatlinburg’s average Airbnb occupancy rate was roughly 70%, with summer and fall occupancy rates exceeding 80%. Those numbers held firm across room counts from studio to 5+ rooms. “It is just explosive popularity,” said Airbnb spokesperson Ben Breit of the massive influx of tourists into the Gatlinburg and nearby Pigeon Forge areas. “The weather is perfect; you’re up in the mountains…I just can’t imagine a better place to be.” Investors should note Gatlinburg is also a hotbed for exotic, adventure-based short-term rentals, including treehouses. Treehouse rentals flourish in the area, with some investors reporting generating hundreds of thousands of dollars in annual revenue with these assets. However, investors must remember treehouses and “tree forts” come with many additional factors including zoning and safety ordinances that might not apply elsewhere. “Treehouse maintenance is required every year to ensure the structure and the tree(s) remain safe and secure for years to come and, more importantly, that its users are not put at risk,” explained Pete Nelson, master treehouse builder and host of Animal Planet’s “Treehouse Masters.” Owners of all treehouses, but particularly those who own short-term rental treehouses and may not be in regular, on-site contact with their properties, must be aware that treehouse hardware can shift over time, thus changing the load-bearing abilities of the massive treehouse attachment bolts (TABs). Vigilant monitoring is the only thing that can prevent disaster. A Booming Market Leaves Locals Concerned About a Correction At present, the Gatlinburg market does appear to be veering into a buyers’ market, with most homes selling below list price (see “By the Numbers” sidebar) and local housing inventory rising. Of course, this does not necessarily mean a crash is imminent. However, as pandemic-era investors who may no longer be able to work remotely or who find Sevier County’s decision to classify some short-term rentals as commercial properties (resulting in higher tax rates on related income) does not work within their budget leave the area, there will likely be a significant slide in investment-property prices. “The tourists are leaving the industry and the professionals are coming in and making the market better,” observed New York-based short-term rental operator Paul Kromidas in July 2023. At the time, he predicted this shift would happen “over 24 months.” This

From Framing Houses to Forging Customer Relationships

by Carole VanSickle Ellis
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Jeff Watson, Home Depot’s Senior Director of Pro Sales West By Carole VanSickle Ellis When Jeff Watson was framing houses in college, he had no idea that his decision to leave that job and look for “more consistent” work at The Home Depot would result in a career with the company spanning more than 29 years (and counting). That initial decision shaped Watson’s professional life — for the better, he said. “For me, it has been a wonderful growth opportunity,” Watson said. “I was going to college and framing houses, then came to Home Depot to try to have a more consistent job so I could get through school. When I graduated from college, I ended up staying and have had some incredible experiences ever since.” Currently, Watson serves as Home Depot’s senior director of Pro Sales West with a specific focus on “outside sales.” This division of the company is dedicated to what Watson describes as “pursuing the professional customer in a more complex project environment;” his team works with some of the company’s largest Home Depot Pro customers to help them source products and services needed to complete jobs and perform on a larger scale. “It is definitely a unique position,” Watson said. “We have always been grateful for the Pro Business that walks into our Home Depot stores or shops with us online, but we realized over the past several years that some of our biggest customers really needed new types of support and solutions that would enable them to thrive in their businesses and steer their larger project purchases to Home Depot. That might mean consulting with them about the best product choices and decisions or helping them figure out when to start thinking about the next purchase so their timeline remains intact.” Whatever the need, Watson’s team is dedicated to first identifying it and then meeting it in unique ways only possible because of their close working relationships with these customers. Translating Personal Experience to Professional Success Over the course of his own personal real estate journey (buying and selling seven homes over the course of roughly two decades), Watson became very tuned in to the elements of the industry that are most important to keeping projects on track for his clients. In the end, he said, it boils down to two elements: products and services. “So many of our customers’ entire focus has to be on getting properties up to speed — either by updating or renovating new assets or fixing up and maintaining existing ones — so those properties can be either rented or sold,” Watson explained. “When you have a really large company, you need strategies and capabilities to alleviate friction that comes with purchasing products for those projects. That is where my team comes in.” Watson recalled an incident while in a previous role that really drove home for him the need for a new infrastructure when it came to serving large-scale real estate investors. A renovator who was dealing with multiple assets in markets distributed around the country ordered doors for a project in one area that were identical to those the investor had used successfully on another project. Unfortunately for this individual, the maxim that “location is everything in real estate” held true in this scenario, and the doors that had been appropriate for his project in one state turned out not to meet code in the new market. However, Watson said, the customer who placed the order with the store failed to note this potential issue, simply replicating the original order for the doors. When they came in, the customer was furious. Watson returned early from a family vacation, resolved the situation, and realized there was a clear need for a more “centrally located” type of associate on the team. “We saw that there was a need for people who would understand some of these clients are transacting in multiple areas and markets and would know to ask the customer to check the local building codes,” he observed, noting many of his team members have a deep familiarity with local building trends and can assist customers in need of insight in this arena as well. “Today, that is something our outside sales representatives are capable of recommending along with the Home Depot Pro Support Center folks, whereas sometimes store associates may only leverage the closed quote order history. We knew that bringing this element to our team could give customers a better experience.” Watson is particularly proud of his work with Home Depot and recalled an opportunity in his previous role over National Accounts to expand in order to better serve the Pro customers and specifically serve the real estate investing industry more appropriately. Over the past couple of years, he headed up an initiative to segment this area of business into four distinct verticals and establish experienced, qualified leadership positions in each vertical, including a vertical dedicated entirely to residential property managers and investors. “The result has been we are now able to generate lots of value and create a more streamlined approach and better pricing tools to help that industry,” he said. And the original irate renovator? Well, Watson and his team were able to resolve the situation to his satisfaction. After remaining a steadfast Home Depot customer for nearly 10 years after that incident, the investor sold his company to a private equity firm and has started several other businesses. “They are all Home Depot customers, of course,” Watson laughed. A Proud History of Growth & Career Enhancement As a long-time Home Depot employee himself, Watson does not fail to note how the expansion of the outside-sales program has changed lives within the company as well as outside of it. “Six years ago, the National Account team consisted of about eight associates, and, five years later, it was up to 32. The Outside Sales organization has grown three times over in the last three years alone with over 1,000 associates impacted. That is a