REI INK

Regional Spotlight

REI INK’s 2023 Real Estate Outlook

Changing Trends Bring Opportunities in the New Year By Carole VanSickle Ellis As the end of 2007 drew to a close, the state of the housing market was not confusing; it was just bleak. 10 million mortgage borrowers were set to lose their homes. New-home sales volumes had fallen by more than 26% (a record), and the median price of a home had fallen by 10%. The housing market was clearly heading for a nasty, nasty crash, and the whole country knew it as the 2008 New Year rolled around. Now, 14 years later, the word “crash” is floating around real estate circles again. However, it does not necessarily mean the same thing it did in the mid-2000s, and that is a good thing for real estate investors and the national economy as a whole. “A crash would be a consistent with a lot of foreclosures: people losing their homes with prices falling below the amount of mortgage debt that is owed, and people being forced or voluntarily leaving their homes,” explained Mark Zandi, chief economist at Moody’s Analytics. Lawrence Yun, chief economist for the National Association of Realtors, agreed, declaring around the same time that today there is “no actual crisis in terms of foreclosures or people being forced to sell at a loss.” However, both economists and many other real estate professionals and analysts agree: A correction is coming. The question, for most investors, is one of where the correction will hit rather than if or when. “The market is going to shift,” said Virginia real estate investor and agent Chris O’Neal. “We went through COVID, and you did not see very many foreclosures and short sales [during that time]. Now, the market is definitely set to drop a little, but that just means it is a good time for investors to pick up some of these deals.” O’Neal, who teaches real estate agents how to acquire investment properties for their own investment portfolios, does not expect his market to experience a particularly dramatic downturn, but he said that he is already seeing changes as 2022 draws to a close. Properties for sale may not be in as good of a condition as they were just a year earlier, and sellers are definitely feeling more motivated to get a deal done and closed. “When people are worrying about foreclosure or in pre-foreclosure, they are not making upgrades before they sell,” O’Neal explained. “If they cannot pay their mortgage payment, they probably are not paying to fix up the house. These properties will usually go to investors because most [retail] buyers do not want to tear up floors, remodel kitchens, or replace a roof right after they move in.” Rick Sharga, executive vice president of market intelligence at ATTOM Data, also expects a “slowdown” in real estate in 2023, but emphasized that a variety of factors should combine to prevent a full-fledged housing meltdown. “From a price standpoint, we are not likely to see a housing crash in 2023,” he observed in late November 2022. “Year-over-year prices are still going up, although not as rapidly as they were a few months ago. We are facing another year of very low inventory and demographically driven demand [from young adults entering the market], and we are not likely to see builders overcrowding the market in the coming year,” he explained. “The whole supply-and-demand environment going into 2023 is the opposite of what it was [heading into] 2008.” Sharga did note that corrections were likely to be highly localized, with some markets potentially experiencing double-digit losses while others hold steady or even continue to gain value. “The reality is that it comes down to the local market,” he concluded. “California could drop 10% off its peak, while the southeast might not see price declines at all. ‘Zoom towns’ could see huge declines, but there could be a short-term boom in single-family rental (SFR) markets as home prices climb out of reach.” Zoom Towns Could Spiral Down In early 2020, the entire country took a hard turn into remote work, discovering that not just any internet connection (or open-plan room layout) could support several kids watching online school and two adults working remotely and full-time. However, as the year progressed and the pandemic refused to fade, more and more workers settled into remote work and, for many, the new full-time home-office lifestyle meant new opportunities they had never previously imagined. As workers moved themselves and their families to more scenic locales thanks to the absence of a required commute, “zoom towns” sprang up in attractive locations offering relatively affordable housing like Boise, Idaho; Bellingham, Washington; and Nashville, Tennessee. Home values in zoom towns shot upward. Nashville prices rose 56% between February 2020 and September 2022, while Boise posted roughly 20% gains in 2020 and 25% gains in 2021. In fact, the population of Idaho as a whole grew by nearly 3% during the pandemic. “Historically low inventory coupled with rampant demand resulted in above-average price growth and a highly competitive market [in zoom towns like Boise],” observed Norada Real Estate Investments founder and CEO Marco Santarelli. “However,” he added, “The changes we are seeing now in Boise price growth, inventory, and slower market times are moving us toward more normal market conditions.” Given that Moody’s rated Boise as 72% overvalued in 2022, those “more normal market conditions” could represent huge opportunities for a real estate investor willing to watch and wait for the bottom of a zoom-town price correction. Another factor in the zoom town correction trend will be employers’ willingness to permit remote work in the post-pandemic market. Although some analysts predict that one in four jobs will become permanently remote by the end of 2023, others warn that remote work could be on its way out. “Conditions for remote work appear to be cooling down much faster than for non-remote jobs,” observed LinkedIn head of economics and global labor markets Rand Ghayad in his November 2022 labor market update. He

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Clarksville, Tennessee

“Tennessee’s Top Spot” Could Beat the Heat in 2023 By Carole VanSickle Ellis Clarksville, Tennessee, might have been a “hidden gem” in the early 2020s, but now Tennessee’s self-proclaimed “Top Spot” market is making headlines both for meteoric appreciation and the potential for local home values to plummet by as much as 20% in 2023 according to a recent study released by Fortune magazine. Interestingly, many local real estate professionals believe Clarksville will successfully circumnavigate the market softening that so many other markets that experienced similar pandemic-fueled booms are approaching. Christian Black, a local realtor and former president of the Clarksville Association of Realtors (CAR), insisted that many analysts like those on the team at Fortune fail to consider several factors that make the Clarksville market uniquely resilient to post-pandemic price declines. “I don’t know that they are taking into account baby boomers moving here from higher-taxed states,” Black said, adding, “I don’t think they are taking into account the outside money that is coming in.” He also said he expects millennials who “waited to join the housing market” will likely keep demand for housing in the affordable Clarksville market high. The city boasts a cost-of-living that is roughly 8% lower than the national average despite being about 4% higher than the average cost-of-living in the state of Tennessee. Money magazine named Clarksville its top place to live in 2019, and the market was ranked sixth-most-attractive in the country to millennial homebuyers by the Nashville MLS using U.S. Census data in September of this year. “With low cost-of-living and a highly educated population, Clarksville is poised to see quite a bit of growth in the near future,” opined Nashville MLS analysts. They added that data indicates homeowners are still “likely to see their home values rise quite steadily” thanks to major employers like nearby Fort Campbell and Austin Peay State University. A Combustible Combination of Hot Housing, “Explosive” Growth At the beginning of 2022, OpenDoor.com ranked Clarksville the hottest housing market in the country. The company’s research team cited an extremely low housing inventory (less than one month), extremely low volumes of new-construction homes available in the area, and low days-on-market counts. OpenDoor.com head of city operations, Rob Reiling, noted Clarksville ZIP code 37042 was the “hottest” in the country at that time, and Travel Noire reporter Jasmine Osby added that proximity to Nashville (just under an hour) makes Clarksville “one of the trendiest places to live [that] still offers all the amazing amenities of a big city at an affordable price.” Of course, with skyrocketing home prices comes an eventual lack of affordability. With the one-year price change in Clarksville hovering just under 25% and the five-year price change higher than $136,000, the city is certainly hovering on the brink of an affordability crunch. It remains to be seen if local professionals like Black, who believe the market can withstand the demand for the foreseeable future, or the Fortune analytics team, which predicted the market is too overvalued to sustain growth in 2023, will turn out to be correct. Black’s argument that millennial buyers and renters from other areas of the country find Clarksville appealing certainly appears to hold water; according to U.S. Census Bureau data, more than one in six homeowners in Clarksville are younger than 35 (compared to one in 10 nationally). Calling Clarksville’s recent growth “explosive,” the CEO of the Clarksville Economic Development Council, Buck Dellinger, cited local dedication to expanding the local business as a key component in bringing new residents into the city. “Clarksville- Montgomery County is a top-requested location for new companies to show interest and perhaps make their new home,” Dellinger said this past January. In 2021, the city’s Industrial Development Board (IDB) paid $18 million for 400 acres to be developed into an industrial park that is already attracting multiple companies that could bring thousands of job opportunities into the Clarksville region. Dellinger said many of the companies currently considering Industrial Park East have requested nondisclosure agreements keeping their identities under wraps, but cited two potential projects that have given permission for their names to be released. Project Ocean, an electric vehicle technology company, could snap up the entirety of the industrial park and an addition 46 acres besides; Project Lisbon, a tech company, is interested in “at least half” of the park and “has the potential to bring $800.6 million in capital investments and 2,000 jobs with a $23/hour starting wage” to the area. Dellinger also noted Clarksville is ideal for distribution companies because more than half of the U.S. population lives within one day’s drive of the metro area. “[It] makes distribution a good option,” he explained, noting that the park is close to the interstate and rail transport options. A Strong Market for Rental & Fix-and-Flip Investors Thanks to proximity to Fort Campbell, there is a strong military presence in Clarksville that keeps the economy resilient and the local rental market particularly strong. Slightly more than half (55%) of Clarksville residents are renters, and rents are still rising in the area although they appear likely to level off sometime in 2023 as the residential retail market softens nationally. With the local population still growing (it rose by more than 6% between 2020 and 2021 and appears on track to do so again), the need for single-family residential housing is likely to be stronger than ever in 2023. Investors who can help meet this need will find a place for themselves quickly in the Clarksville market. Justin Cory, a local broker and former combat medic who has been working in real estate in the area since 2008, observed, “The number of jobs and median salaries are higher in Clarksville compared to its rural surroundings, [and] the unemployment rate has been in alignment with the national average, demonstrating a low historical risk for rental owners.” He also noted that out-of-state investors, like residents, will likely pay relatively low property taxes. “The average Tennessee property-tax bill is the fifteenth-lowest in

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Ogden, Utah

The “Junction City” Market Leads the Way as the Market Shifts By Carole VanSickle Ellis Ogden, Utah, boasts a “wild” city motto: Still Untamed. That motto, adopted in 2016, refers to the area’s unconventional roots. As Roger Brooks, whose company rebranded Ogden six years ago, explained to a bemused audience at the time, “While we replaced bootlegging, prostitution, and gambling with skiing, kayaking, and mountain biking, Ogden’s soul will always remain untamed.” Since that time, the Ogden real estate market adopted the motto as well. Average home prices in June 2016 hovered just over $250,000; in June 2022, that number was just shy of $450,000. Then, things began to change, and Ogden’s untamed market geared up for another round of wild, post-pandemic swings. By September 2022, Ogden home prices were falling as the national housing market began to soften in response to the Federal Reserve’s rate-hiking policies. Median list prices hovered just over $370,000, a 17% decline in home values that stands out compared to the reaction of other markets around the country where demand has softened but prices have yet to decline. In Ogden, the city’s massive, pandemic-fueled boom is starting to wind down, with Realtor.com reporting more than a quarter of all listings posted at least one price reduction during Q2 2022 and ranking Ogden sixth on its “10 Cities Where Sellers are Slashing Home Prices the Most.” “With buyers pulling back, homes linger for a longer time on the market and more homeowners have to slice prices to get a deal done,” said George Ratiu, senior economist for Realtor.com. He added, “Price cuts are hitting hardest in markets which have been on a hot streak during the pandemic – cities which saw an influx of buyers looking for quality of life, more space, and affordability.” Ratiu also cited Ogden’s “fast ramp-up in prices due to the inadequate supply of housing” as a source of the price-slashing now and noted that the city experienced higher appreciation during the COVID-19pandemic through June 2022 than the national 26.6% increase over the same period. In September, Moody’s Analytics appeared to concur; it ranked the Ogden-Clearfield metro area as the “most overvalued market in the state” with overvaluations in excess of 50%. “Soaring prices were largely due to out-of-town homebuyers moving in during the pandemic, competing with locals for a limited supply of homes,” observed Redfin analysts in a report published in July of this year. At peak, prices in Ogden reached $500,000, 57.2% higher than they were in May 2020. Now, the trend is starting to reverse. In response to that reversal, savvy sellers are suddenly willing to be flexible on their pricing, said Redfin chief economist Daryl Fairweather. He observed, “There are two kinds of sellers in today’s market: Those who already know the market has cooled, and those learning about the cooling market as they go through the selling process.” For real estate investors in Ogden, both types of sellers may be more willing to make a deal in order to sell quickly if they are beginning to be concerned about the market shifting downward. Not Just a “Zoomtown” Although the Ogden market certainly benefited from pandemic-induced buying over the past two years, the area itself appears poised to weather the post-pandemic softening with a fair amount of resilience. Prior to 2020, Ogden had already been experiencing migration into the city from nearby Salt Lake City and Provo, with more than 8,600 people moving to Ogden from SLC between 2014 and 2018. Because Ogden, SLC, and Provo are all connected by commuter trains, light rail lines, and interstates, movement between the cities is relatively smooth and painless, making it less likely that calls for employees to return to local offices will result in high-volume departures. The city has also dedicated resources to developing its own “Silicon Slopes,” bringing in tech growth during the pandemic as tech startups looking for access to the outdoors and relatively affordable (compared to Silicon Valley) space in which to grow began considering Ogden when putting down roots. Although the nomenclature “Silicon Slopes” typically refers to the Provo/Salt Lake City/Park City area, Silicon Slopes Ogden is the city’s deliberate effort to expand the area and be included in the region. In 2020, The Brookings Institution named Ogden one of its “lifestyle cities [likely] to see accelerated tech growth in 2020,” and this prediction was borne out over the following two years. Sara Mees, one of the city’s business development managers, said at the time in response to the Brookings research, “We have seen two trends. One of them is from smaller software companies that have been founded and grown here in Ogden…. A number of them have been pretty successful at scaling growth here, [and] the other is related to shifts at Hill Air Force Base.” She continued, “A lot of new programs [at the base] have a significant software development component.” The result was that many software companies and aerospace defense contractors began seriously considering expanding to Utah, and Ogden experienced a 7% growth in tech-related jobs between 2019 and 2020. Between 2020 and 2022, that growth continued, with the city’s tech incubator, Catalyst Campus, facilitating connections between local startups and other tech businesses and the Air Force. Catalyst Campus is based in Colorado Springs, Colorado, and opened its Ogden branch in 2021. In 2022, it partnered with local Weber State University and the city to secure $20 million from the state of Utah to build a Sensitive Compartmented Information Facility (SCIF) to store sensitive work from external surveillance. An additional $65 million in private investments and $30 million in “local funding” will contribute to the effort as well. The facility will improve security for companies in the incubator hoping to work with the Air Force and makes them more attractive as contractors. “We wanted to remove the barrier of having to go on base, so all these small businesses who don’t have classified environments to work in now do,” explained Catalyst Campus

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Gainesville, Florida

This Hotbed of Growth Needs Real Estate Solutions By Carole VanSickle Ellis In June of this year, Gainesville, Florida’s home prices were on their way up, much as they have been for the last decade. However, this past June’s median sale price of $365,000 was a far cry from a decade earlier when median homes sales were less than one-third of today’s price tag. Alachua County, which contains the majority of the Gainesville metro area, has been a popular market for real estate investors for years due to the inherent benefits of investing in the southeastern United States, in general, and in the state of Florida, in particular. The combination of low cost-of-living expenses, no state income tax, low sales tax rates, and an extremely temperate climate have created a demand for Florida housing for decades. With the advent of the COVID-19 pandemic, housing demand skyrocketed. Even with many companies partially or entirely abandoning remote work practices in 2022 and calling employees back to offices in larger metro areas, that demand continues to create a white-hot market in central Florida as well as on the coastlines. Gainesville, with its central location (two hours of driving from Orlando and Jacksonville), the local presence of the University of Florida, and its position in the north central region of the Florida High Tech Corridor, is set to remain a market where housing demand is high and availability is scarce for the foreseeable future. “For every home based on a [given] price point, you will have possibly 10 buyers that want that home,” observed one local agent in May of this year. She noted that listings had plummeted to only about a fifth of the volume the area has seen in previous years. Although listing volumes have risen slightly since Spring 2022, rising interest rates will likely keep many buyers out of the market, keeping competition fierce even if the bidding wars involve three or five buyers instead of 10. Realtor.com analysts still rate the Gainesville market as a clear sellers’ market, noting that at the end of the summer, homes were on the market only 49 days. However, investors should note that homes are selling slightly below list price. In August, the median list price was $320,000, while median sales prices were just under $290,000. Given that the national median home price exceeded $440,000 midway through this year, however, demand in Gainesville is unlikely to ease to the point that prices will fall in the near future. A strong demand for housing from multiple, distinct populations of residents and ongoing scarcity issues have created an environment in Gainesville where fix-and-flip investors are thriving. While much of the rest of the country has posted falling returns for fix-and-flip deals, Gainesville flipping rates are still high. In fact, nearly one-sixth of all transactions are flips, according to ATTOM Data’s Q1 2022 “U.S. Home Flipping Report,” and cash buyers have a distinct advantage. “As interest rates continue to go up, cash buyers should be in an even greater position of competitive advantage in the fix-and-flip market,” wrote ATTOM Data executive vice president of market intelligence Rick Sharga. He added that investors with “larger, better capitalized” businesses could begin to increase their activities in the coming months. In the category of markets with a population of less than 1 million, only Durham, North Carolina, had higher flip rates than Gainesville. As of August 2022, available inventory was still falling, with 5.6% fewer homes for sale in the area than there were in July. While interest rates may be decreasing the volume of competition for properties, those still in the thick of things are highly competitive. A Prime Location for Education & Tech Gainesville is not necessarily the first market most investors might think of when they think of the sunny state of Florida. It is located in the northern, central part of Florida, without beach access (although Flagler Beach is about 90 minutes away, which places the city solidly in the “beach-proximal” category so important to many COVID-fueled moves), and about two hours from Disney World. However, Gainesville is home to the University of Florida and a clear landmark on the Florida High Tech Corridor, a 23-county region anchored by three of the largest research institutions in the country: the University of Central Florida (UCF), the University of South Florida (USF), and the University of Florida (UF). Of those three, Gainesville’s hometown university, the University of Florida, is ranked fifth on the U.S. News & World Report list of best public universities in the country, boasts an on-site student population of roughly 75,000, and is highly affordable. The Florida High-Tech Corridor was founded by the Florida legislature in 1996 as an economic development project intended to attract and retain technology companies. At that time, several companies in residence in the state were being actively courted by other states and even countries. The corridor was originally conceived as part of a larger plan to incentivize existing companies to reinvest in the area rather than relocate and to also bring in new tech companies from other areas. Gainesville’s University of Florida has served as a full partner and co-chair on the Florida High Tech Corridor Council since 2005. The institution also plays an active role in chairing and supporting the growth of related initiatives including grant-matching programs, STEM programs that connect students with experts in industry and help the state retain young, professional talent, and a variety of magnet programs in the Gainesville area centered around the life-sciences industry and artificial intelligence innovation. Gainesville has benefitted from the corridor and UF’s position as an anchor in its development both directly and indirectly. There are many nonprofits dedicated to innovation and business incubation now located in the Gainesville area, while the university itself prioritizes workforce development programs that create and sustain valuable jobs in sectors known for creating more employment and lasting opportunities. At time of writing, UF had recently made headlines for surpassing $1 billion in research spending

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Durham, North Carolina

There are Lots of Reasons to be Bullish on the “Bull City” By Carole VanSickle Ellis When Google announced in March 2021 that it would create its next “engineering hub” in Durham, North Carolina, many investors in the area were not particularly surprised. After all, Durham, also known as the “Bull City” due to the longstanding presence of Bull Durham Tobacco, the first nationally marketed tobacco brand in the United States, is better known today for its place as one of the vertices of North Carolina’s vaulted “Research Triangle” thanks to the presence of Duke University, Duke University Hospital, and North Carolina Central University. “We are fortunate…because we have a longstanding relationship with Google in many facets of their business,” observed Greg Victory, executive director at the Duke Career Center. Durham mayor Steve Schewel chimed in, noting smugly, “I would say, ‘Welcome, Google,’ but Google already has a strong presence in Durham.” Local real estate developer Jessica Brock summed up local sentiment, observing “What is most important is that they are here, and they are in our community, and they are going to be hiring our talent and making this one of their major hubs.” Google itself promised the new center would create about 1,000 jobs for the area and cited Durham’s “best and brightest engineers in the world” as one of the primary reasons the company selected the city for the hub. Google sublet space from Duke University in downtown Durham and began moving people and equipment into the city in May 2021. Just 18 months later, the company announced it would be expanding its downtown footprint and debuted a program designed to certify teachers in the use of Google digital tools designed to “support student learning, better manage coursework, and improve student outcomes.” For real estate investors, this type of economic development and expansion is simply par for the course in Durham. Even in the midst of COVID-19-related shutdowns in April 2020, the city focused on growth. In fact, Durham County supported the creation of 14 economic development projects and 6,900 new jobs in the area starting that very month. The issue moving forward would be one that investors definitely can help resolve: a lack of available housing. “Durham is going to see heavy population growth over the next decade, and the relatively young population is helping drive demand for rented houses and property purchases,” observed Norada Real Estate Investments CEO Marco Santarelli. He added that the “limited inventory and strong demand” has already led to increases in home prices in Durham and called the city “one of the fastest-growing communities in the nation, [which could] indicate the city’s future real estate investment potential.” A Natural Hot Spot in the Triangle Region The Research Triangle, also known as “The Triangle,” is the nickname for the area of North Carolina anchored by the cities of Raleigh, Durham, and Chapel Hill (see graphic on p.44). Although some definitions place as many as 16 counties in the extended Triangle area, the core counties are Wake, Durham, and Orange. The city of Durham, North Carolina, is located in Wake and Durham Counties. Durham itself is home to Research Triangle Park (RTP), which was created at the behest of Duke University, the University of North Carolina in Chapel Hill, and North Carolina State University in the 1950s when the institutions encouraged the state legislature to purchase a large tract of land in Durham County and set up a “science park.” Today, RTP is among the most prominent high-tech research and development parks in the country, in large part thanks to its early inception and a steady flow of highly trained in-state graduates. The influx of well-paid science professionals into the RTP area has affected housing affordability for decades, but 2022 brought some of the worst metrics in this regard that the area has seen. However, local professionals reported in July that buyers who are “ready, willing, and able to make an offer on a property” may find themselves in a position to pay a little below asking price and, as one broker put it, “get a few dollars or a little closing cost help” in the bargain as the market cools. Wake County properties tend to be relatively more affordable than Durham County properties, with Wake homes posting median sales prices around $317,000 compared to Durham’s $426,000. For investors, a fast, convenient sale could be the key to getting deals done with sellers afraid of missing the last gasps of the housing boom in the Triangle area. For homeowners accustomed to seeing bidding wars with more than a dozen participants, today’s “slowdown” could indicate that buyers might soon have the upper hand – however unlikely that scenario may actually be. Offering to acquire properties as-is, for cash, or with a short window for closing could be the key to success. “Overpopulation” Means Something Different in Durham In most growing tech hubs, the term overpopulation has more to do with how many new households are forming and how short on housing units the market may be. However, in Durham, some real estate professionals are using it to describe the population of real estate agents and other real estate professionals in the local market. In March of this year, there were roughly 2,000 listings in the Durham market and 13,500 realtors active in the area according to the Durham Regional Association of Realtors (DRAR). According to Shawn Hays, DRAR president, the hot market and the pandemic both contributed to the influx of active realtors and agents. “More people have had time to get their license because the education has changed to online from in-person. It became more accessible,” he explained. Local North Carolina State University economist Mike Walden observed at the time, “The labor market in any area will seek its own balance…[but] it is probably going to be over-populated with agents this year.” As of the start of Q3 2022, there were just under 800 listings in the area (down 3.9% month-over-month according

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Birmingham, Alabama

There’s Plenty of Charm Left in the South’s “Magic City” By Carole VanSickle Ellis If you were hoping the much-hyped housing “cooldown” would make things more affordable in southeastern cities like Birmingham, Alabama, then it might be time to change your wait-and-see strategy for a faster-paced approach. In the southern “Magic City,” which boasts the largest metropolitan area in Alabama and claims a history of economic growth of nearly 4,000% in its first four decades of existence, the housing market is hotter than ever. “We are seeing a surge in buyers trying to outpace interest rates because their buying power will shrink over the next few months,” observed Richard Grimes, CEO and president of RealtySouth, in a Bham Now-hosted panel in late May. He added, “There is no mechanism in our market to create 1,000 more homes, so supply is still going to be short.” Co-panelist Stuart Norton, associate director for the Alabama Center for Real Estate (ACRE) at the University of Alabama, predicted that upward pressure on home prices might diminish over the coming months while the rate of home sales slowed, but he did not expect prices to fall during the “cooling” period. Birmingham’s biggest real estate-related bottleneck is, as Grimes implied, a lack of new construction in the area. “The 211 new homes sold [during March 2022] represented 13% of all residential sales in the Birmingham area,” noted Marco Santarelli, CEO of Norada Real Estate Investments. The pickings are particularly slim when it comes to affordable housing, and the local housing authority recently reported that building material cost increases are going to delay projects intended to cater to senior residents and families. The authority demolished 29 residential buildings last year but has found itself unable to replace the demolished housing, thus displacing families and other residents and creating more strain on local residential inventory. “We continue to see historically low inventory [and] buyers are bidding more aggressively than they were in 2021,” said Lucy Parker, a local realtor. “It is rare to find a house that has been on the market for more than a few days,” she added, noting the out-of-town buyers are also keeping the housing supply tight. With just under half (49%) of all single-family residences in the city registered as rental properties, many of those buyers are likely investors hoping to leverage the area’s skyrocketing rental rates and relative affordability compared to the rest of the country. According to a recent report from RealEstateWitch, rates are currently rising four times faster than median income in the area for a year-over-year increase of 13%. In fact, in Birmingham it is currently cheaper to buy a home than rent one. Nevertheless, home flipping returns in Birmingham, as in many other areas of the country, have been falling since 2020. According to a Q1 2022 report from ATTOM Data Solutions, although home-flipping volumes skyrocketed in 2021 to higher than had been seen since 2006, profits sank in Birmingham as well as nationally. In Birmingham, fix-and-flip returns fell by seven percentage points between 2020 and 2021 (the most recent annual data available). The “Comeback Market” Comes Back (Again) When Birmingham was founded in 1871, the area was ripe for economic expansion in the wake of the Civil War. Over the first 40 years of its existence, Birmingham earned its “Magic City” nickname thanks to 4,000% economic expansion thanks to a large steel industry presence in the area. While this industry has declined in prominence overall since the late 1800s and early 1900s, the city still supports steelmakers like U.S. Steel, CMC Steel, and Nucor, and U.S. Steel completed the construction and start-up process for an advanced electric arc furnace (EAF) in 2020, adding 1.6 million tons of steelmaking capability to the market. This is increasingly important for markets like Birmingham with large steel industry presence because the ongoing Ukraine-Russia conflict is limiting access to foreign iron-ore products. Although Alabama as a state does not typically call to mind words like “innovation,” “biotechnology hub,” or “financial center,” the truth is that Birmingham boasts strong representation in all of these sectors and many more. During the COVID-19 pandemic, much of the informal work to bring startups, biotechnology employers, and international industry presence to the city was formalized under state governor Kay Ivey’s Alabama Innovation Commission. The commission makes policy recommendations related to attracting job seekers, building an “innovation economy,” supporting entrepreneurs and startup communities, and improving Alabama’s global reputation. Birmingham is ahead of the curve in this effort and benefiting from the head start. From July 7-17, 2022, the city will host the World Games 2022, an 11-day international multi-sport event organized with the support of the International Olympic Committee (IOC). This event alone is expected to bring in more than 3,600 athletes from at least 100 different countries and should lead to significant appreciation in areas in close proximity to the World Games venues, including Avondale Park, Sloss Furnaces, Legion Field, and Central Downtown. Birmingham mayor Randall Woodfin noted that the city’s role as host of the games has been a deliberately thought-out process, saying, “We know about the historical perceptions of Birmingham, and…we are not going to forget our past, but we have evolved…. When a lot of people talk about Birmingham, the images that come to mind are [black-and-white photos from the 1960s], but that is not who we are today.” Woodfin has said on multiple occasions that The World Games 2022 will send a positive “ripple” of information about Birmingham outward around the world. Although The World Games certainly have the potential to be a defining moment for the city, Birmingham already had begun to refurbish its image when it was named host city for the event. The Birmingham-Shuttlesworth International Airport has undergone more than $7 million in improvements; the local transit authority has designed and upgraded miles of heavy and light rail along with the local bus systems, and the city’s City Walk BHAM has recreational space, water features, market space, wine gardens,

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