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Regional Spotlight

Green Bay, Wisconsin

The Packer City is Ripe for Portfolio Expansion…If an Investor is Creative By Carole VanSickle Ellis During the Great Depression, Green Bay, Wisconsin, avoided the worst of the economic downturn thanks to the prevalence of toilet paper companies in the city. In fact, with the introduction of splinter-free toilet paper in the early 1930s, the city’s recession-resistance was all but guaranteed. Today, the “Toilet Paper City” is known more popularly as “Packer City” for its wildly popular football team, the Green Bay Packers, considered among the last of the “small-town teams” and valuable thanks to the winningest record in NFL history (13 league championship wins and four Super Bowl victories) and an exceptionally loyal fan base that has sold out every regular and playoff home game since 1960 regardless of team performance. This record is, of course, marred by the 2020 COVID-19 pandemic, during which Packers fans were forced to stay home and watch their team play in an empty stadium out of concern for public safety. The Packers bring in roughly $15 million in economic impact per playoff home game and have an outsized impact on the regional economy and the local real estate market. Green Bay is a relatively small market, described by its own chamber of commerce as being “much more than two cities, nine villages, and 13 towns.” The city is the third-largest in the state of Wisconsin, however, and tends to outperform the rest of the state in terms of employment and income. In fact, for 2022, Best Places reported Green Bay’s future job growth rate would likely exceed that of Chicago, Illinois, by nearly 10 percentage points and would edge out national growth as well. Although Green Bay’s median income is about $15,000 less, annually, than the national median and is $6,000 below that of Chicago, the town benefits from a relatively low cost of living (82.3 on a scale of 100) and the massive influx of football-driven spending during the NFL season. That influx represents huge opportunity for real estate investors on all scales, from individual short-term rental owners to investors with larger portfolios. For example, one local retiree rents her property near Lambeau Field out on weekends when the Packers play at home. One weekend during the playoffs earns her around $5,500, and regular-season game rates can be hundreds or thousands of dollars for a weekend. That rental income represents most of her retirement budget, said her son, noting that this is the only thing his mother has “lined up” other than social security. So far, it has been enough, and she, like local businesses and the Green Bay government, is determined to keep Packers fans happy – and coming back for years to come. “Our hope and our goal are to ensure that visitors have a very, very positive experience while they are here, and then they want to come back,” said Nick Meisner, vice president of marketing and communications for hospitality group Discover Green Bay. The result of this concerted effort is a strong, stable market that is both resilient and relatively affordable. More than Just a Football Town While the Green Bay Packers certainly are the “headliners” when it comes to a discussion of Green Bay real estate, they are not the only game in town when it comes to investment opportunities. Jeff Cichocki, a Green Bay real estate investor who also runs a hard-money investing fund, emphasized that while the Packers certainly boast an outsized economic impact, Green Bay offers much more than just football. People come to Green Bay and stay for years as well as just for the weekend, he said. “Single-family homes have been flying off the shelves and the amount of cash flooding into the market for investment properties has impacted the Green Bay market in unique ways,” Cichocki said, observing that long-term rentals are a viable option in the area although short-term rentals tend to garner more attention due to the sky-high rates associated with Packers games. “Investors in a position to pay cash for properties will pick up the good deals,” he added, “but we also are seeing investors trying to acquire [over-valued] deals that do not pencil out.” This is due in large part to the very limited residential inventory in the area at present. Cichocki, a private lender himself, also said many buyers are finding themselves unable to finance homes using traditional bank loans because home values are rising so quickly and they are being beaten to the punch by other buyers willing to make purchases without contingencies or for cash. According to Redfin, Green Bay home prices rose by more than 13% at the end of Q1 2022, and average homes are selling about 5% over list price in just about a month’s time. Investors should beware of the temptation to jump at any deal just because it is available since sellers are optimistically pricing properties at present. This type of “fever” can be dangerous, especially in volatile markets where many factors are in play at once. “There is a lot of shakeup in the U.S. economy right now,” Cichocki said. “Markets are moving fast in lots of directions at once with the biggest challenges in the middle. That is why we are still seeing a lot of speculative pricing from sellers looking to see if anyone bites.” Green Bay’s local economy is more diversified than many investors realize thanks to the prevalence of manufacturing jobs in the city and a municipal emphasis on attracting and supporting a startup community. At the end of 2021, county executive Troy Streckenbach announced a variety of workforce investment packages and building projects, including a $15 million STEP Innovation Center and another $5.6 million for an “innovation park” named for Fox River Papermaking and Green Bay Packaging. He reported that GDP baseline projections for Green Bay were “optimistic.” The presence of the Port of Green Bay, a multimodal distribution center connecting marine freight with highway and railroad transport has also contributed to

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Columbia, South Carolina

“Famously Hot” for Decades, City Remains a “Southern Hot Spot” By Carole Vansickle Ellis Columbia, South Carolina, has considered itself “Famously Hot” since 2008, when the state capital officially swapped its former slogan, “Where Friendliness Flows,” for the simpler description referencing, among other things, the city’s summer high temperatures of around 94°F. Unlike most city slogans that tend to last no more than four years, “Famously Hot” lasted nearly a decade before evolving to the longform “The Real Southern Hot Spot,” which the city adopted in 2017 and has retained since. Regardless of which slogan you prefer, the takeaway should be that the city’s real estate sector is certainly boasting serious heat, particularly for real estate investors prioritizing residential rental strategies. “Both the city and the surrounding suburbs have posted impressive population gains over the last 10 years,” observed Roofstock analyst Jeff Rohde at the end of March 2022. With just over half of the city’s population renting instead of buying, WalletHub listed Columbia as one of its “best cities for renters” in mid-2021 and, in Q1 2022, Redfin rated the Columbia housing “very competitive” for its multiple offers, waived contingencies, and sales for about 3% over list price and within as few as three days. Columbia, unlike many other metro areas, actually saw a slightly “cooling” in late 2021 as year-over-year metrics indicated slightly fewer homes (-5%) sold in September 2021 than did in September 2020. However, this cooling was likely more closely related to skyrocketing home prices and plummeting inventory than an actual decrease in value or demand. According to the South Carolina Realtors (SCR), median sales prices in Columbia climbed by more than 11% in 2021 while new listings volumes fell. By the start of 2022, Realtor.com had announced it expected Columbia home prices would rise about 12% in the coming year, which will likely increase demand for affordable rentals as more and more households elect to wait on a market shift to purchase a home. SCR president and ERA Wilder Realty broker Morris Lyles recalled a recent transaction that demonstrated just how difficult it can be to land a home in the area at present. “I have had one house listed [with] 19 offers on it,” Lyles said. “I literally put them all on my floor here in my office and was trying to sort through them.” Chris Winston, chief communications officer at the South Carolina State Housing Finance and Development Authority, warned that a serious dearth of affordable housing in Columbia and in the state at large is coming. “We know that across the state there are challenges because of lack of inventory,” he said. “There just are not enough affordable houses, whether that is apartments or homes.” Real estate investors are already moving in to help fill that gap, but it can be difficult to acquire properties due to the limited inventory available. “Willingness to Serve” Could be the Key to Residential Expansion One contributing factor to Columbia’s low housing inventory is its geographic location and municipal layout, which many developers found challenging early in the COVID-19 pandemic when buyers and renters both preferred single-family residential properties to multifamily properties that they feared might expose them to contagion. “It is kind of tough in the city because you do not just have large tracts of land where you can build single-family houses,” explained Columbia’s director of economic development, Ryan Coleman, in the fall of last year. Fortunately, as the general population has achieved a degree of clarity on the transmission of COVID and means of effective protection, the single-family preference is waning in favor of longer-established preferences for trendy living in business districts and downtown metro areas, making multifamily a good investment in the “famously hot” city. Investors should note that Columbia’s population is growing, but not as fast as other South Carolina cities on the state’s coast. However, Coleman said he sees “good trends” in the city with “a couple thousand people living on or around Main Street, down here in the BID (business improvement district) right now.” He added, “You did not have that 10 years ago.” The University of South Carolina (USC), with its flagship campus in Columbia, also plays a role in drawing in new residents over the long term, and investors providing student housing find a consistent demand for this unique asset class. However, USC does not just bring in students for four years; the school boasts nationally ranked research centers including the Center for GIS and Remote Sensing, the Center for Colon Cancer Research, and the Center for Digital Humanities as well as the Darla Moore School of Business, which is the top-ranked program nationally for its undergraduate program for international business, and the USC College of Engineering, which boasts undergraduate and graduate degrees in aerospace engineering and research opportunities funded by NASA at its McNair Aerospace Center. Roughly 40% of the Columbia population holds a bachelor’s degree or higher, and USC and other higher education institutions attract a combined 50,000 students in the area each year, many of whom remain in the area after graduation to work in the city’s thriving insurance and technology, software and IT, bio/life sciences, and transportation and logistics sectors. Columbia is also home to Fort Jackson, the largest military basic training installation in the country, and thousands of military veterans. The city supports this steady influx of desirable present and future professionals and employees by working hard to attract their employers to the area through tax credit and incentive programs, access to much-needed acreage for new development, and economic development grants awarded based on job creation, capital investment, and targeted industries. For investors seeking “crystal ball” insights into the area, watching Richland County’s designated “Willingness to Serve” reports indicating where developments may be pre-cleared for sewer services and other municipal services can provide insight into areas that may emerge as attractive residential areas in the near future. Columbia’s public transit agency, The COMET (Central Midlands Regional Transit Authority), announced this past

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Houston, Texas

“Space City” Real Estate Still Reaching for the Stars By Carole VanSickle Ellis After setting record after record for home sales volumes and prices in 2021, the Houston, Texas, housing market barreled into 2022 at top speed. While home prices in many of the country’s hottest markets “fell” to single-digit appreciation in early 2022, Space City real estate kicked off the New Year with 19.1% year-over-year gains in value. While many analysts predict price gains will slow dramatically over the remainder of the year and possibly reach an annual rate of about 3.8% by the start of 2023, an influx of buyers flush with cash from the sale of homes in places like Silicon Valley could delay that relative cooling. Local agent and chair of the Houston Association of Realtors (HAR) Jennifer Wauhob described the situation, saying, “There simply are not enough homes out there for consumers to buy right now, and the steady rise in home prices plus increasing mortgage rates create a perfect storm in terms of affordability.” Tightening Inventory Across the Board Inventory is particularly tight in the lower and middle ranges of the market, making first-home purchases particularly difficult for would-be buyers. Sales volumes of homes priced between $150,000 and $249,000 fell by 34% between January 2021 and January 2022; sales volumes on homes priced $150,000 and lower fell by more than 40%. Local buyers have reacted by shifting purchasing to condominium units and townhomes, which sold more than 130,000 units in 2021. Sales in this asset class have exceeded 100,000 units annually just three times. “Consumers’ demand for housing [in Houston] has never waned, and they have paid more for it as the supply of housing has shrunk,” said Norada Real Estate Investments CEO Marco Santarelli, citing low mortgage rates for the ongoing boom in the city. Santarelli recommended investors considering buying properties in Houston keep a close watch on oil prices, since the city’s property values tend to rise with the cost of oil. However, he added, the city’s “extremely diversified economy” makes it “one of the country’s top job creators…and lets you stretch a paycheck farther than anywhere else in the country.” For real estate investors ready to acquire property, the biggest concern will be how close to market value they should pay. For several years now, many investors have been willing to pay market value or even slightly over market value in order to acquire properties that will cash flow over the long term either as short-term vacation rentals or long-term residential properties. With inflation showing every sign of shooting skyward in the near future, many high-volume investors say they are willing to forego the classic “buy low, sell high” mentality in favor of acquisition. “When you acquire a property at a fixed rate and hold it, you continue to pay that rate until the property is paid off,” explained Mike McMullen, CEO of Global Real Estate Services, one of the earliest pioneers of build-to-rent development in the industry. He continued, “On the other hand, your rents go up with inflation, so you are essentially getting a raise each year. Right now, hard assets are the quickest way to wealth.”  Houston’s Diversified Economy is Well on Its Way to Recovery One of the most powerful arguments for investing in Houston is the local economy, which has proved highly resilient to the global pandemic. In fact, the Greater Houston Partnership (GHP), the largest chamber of commerce in the Houston area, reported in January of this year that the city had recovered “roughly 70% of the jobs lost in the pandemic by fall 2021.” The GHP estimated the region would net 75,500 new jobs in 2022, which will place Houston “extremely close to a full recovery.” Houston’s economy has long been oil- and gas-driven, with Phillips 66, ConocoPhillips, Occidental Petroleum, Halliburton, and ExxonMobil all choosing to locate their headquarters in the area. While the economy still benefits from the presence of these companies, they are just one component of the bigger economic picture in 2022. Today, Houston boasts thriving energy, life science, manufacturing, and aerospace industries. It received its official nickname, “Space City,” in 1967, thanks to the opening of NASA’s Manned Spacecraft Center, and has continued to lead the country in this sector. Today, Houston is home to more than 500 space, aviation, and aerospace-related businesses as well as the NASA Lyndon B. Johnson Space Center (JSC) and the Houston Spaceport, which offers laboratory office space, technology incubator space, and large-scale production facilities in addition to being an FAA-licensed, urban commercial spaceport. In addition to aerospace-related industry, Houston’s digital technology sector extends throughout a variety of subsectors including software development, programming, and database management. With more than 8,200 tech-related firms and 500 venture-backed startups, the city is certainly contributing to speculation that it could be the “new Silicon Valley.” Yang Tang, a former Silicon Valley resident and current chief technology officer at digital supply chain and data analytics company GoExpedi, a former Silicon Valley company now headquartered in Houston, explained his company’s decision to leave California for the Houston area. “It’s cheaper to operate a business; there is no state income tax; there is an abundance of land, pro-business policies, lower cost of living, significant talent pool for hiring; and the list goes on and on,” he wrote in an op-ed column for Insider in August 2021. Tang continued, “Like many other tech executives, I think Texas is positioned to outpace California due to its proximity to the world’s top companies in energy, healthcare, and aerospace, to name a few, and its willingness to innovate with technology in those industries.” He concluded, “I chose Houston as my new hometown for its diversity of people and thought…the city’s major port, healthcare systems, and energy sector…. If folks looking still don’t see Houston and Texas as the next technology mecca, they soon will.” Houston is not just a tech mecca, however; it boasts a thriving medical community as well. The Texas Medical Center (TMC)

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Springfield, Massachusetts

Looking for Stabilization, Growth in 2021 and Forward  by Carole VanSickle Ellis Like most of the country right now, the Springfield, Massachusetts, housing market is hot. Median sales prices rose more than 17% in the Springfield area between January 2020 and January 2021, and Realtor.com reported in May that homes were selling, on average, for 2.63%above listing price. However, there are some signs that the Springfield market could “stabilize”as early as this fall, said local investor and residential real estate expert Alex Anthony. “I think we will still feel the pinch until the end of the summer, but I think the urban flight will subside provided the pandemic numbers continue to decline,” Anthony explained. “That will alleviate some of the pressure we have felt in this area.” In addition to working with retail buyers, Anthony, who is a realtor with William Raveis, works with real estate investors to acquire investment properties in the region. She reported she already is seeing signs that the pinch in inventory could be loosening in Springfield as multifamily property listings begin to hit the market along with desirable residential properties. “The entry-level homebuyer is starting to get more opportunities,” Anthony said, noting that high-end homes with outdoor entertaining areas are still in high demand. However, not everyone agrees with Anthony; WalletHub.com recently ranked Springfield among the “worst cities in the country for first-time homebuyers,” citing “expensive housing and high real estate taxes.” According to other data analysts, the city’s high quality-of-life rankings often cause would-be homebuyers to overlook these potential downsides to ownership in the Springfield area. Perhaps the most telling indicator for real estate investors interested in acquiring property in Springfield is a report from CoreLogic. The “Markets to Watch: Top Markets at Risk of Home Price Decline,” report uses CoreLogic’s Market Risk Indicator (MRI) to predict the overall health of housing markets. CoreLogic placed Springfield at the top of the “at-risk” list in July, assigning a probability between 25 and 50 percent that the market would see a price decline by July 2022. With continued demand in the area high, real estate investors hoping to buy and hold rentals or fix-and-flip to retail buyers are likely to see continued demand for properties—if they can acquire them. A History of Innovation and Resilience Springfield, which often bills itself as “The City of Firsts” and “The City of Progress,” was founded in 1636 and designated as the site of the Springfield Armory due to its central location (at the time) in the 13 colonies. The armory produced Springfield rifles for the Union army during the Civil War, and the local national park features the largest collection of historic American firearms in the world. Springfield also boasts firsts including the first American dictionary, the first American gas-powered car, the first successful American motorcycle company (Indian Motorcycles), and the first American musket. These innovations made the city an early center for precision manufacturing, but Springfield fell into an economic decline beginning in the 1970s following the closing of the Springfield Armory. However, by 2015, revitalization projects like the Hartford Line, a joint-venture project between Connecticut and Massachusetts that provides commuter rail service between New Haven, Connecticut, and Springfield, Massachusetts, were beginning to attract new residents and business to the area. The Hartford Line and Springfield’s relative proximity to both Boston and New York City made the area an attractive refuge for workers leaving these higher-cost areas during the COVID-19 pandemic in 2020. Local experts believe many of these residents may be induced to stay permanently, and local policymakers were creating incentive programs for telecommuters moving to Western Massachusetts as early as 2019. One proposal provided up to $10,000 to cover relocation costs, office equipment, and acquisition of co-working space. “If done correctly…it can be a tremendous opportunity to expand job creation and opportunity, especially to regions that have been left out of the last 20-plus years of tech and biotech growth,” observed state senator Eric Lesser. He noted that the western area of his state, which includes Springfield, has “excellent schools, cultural resources, open space, and quality of life.” He hopes to add an east-west rail link connecting Boston to Springfield in the near future as well as improving internet connectivity in communities with lower-quality connectivity. Many of these communities will be areas that will interest investors because they contain lower-priced homes or are “gateway cities,” as Massachusetts defines midsize urban centers that have suffered due to the disappearance of manufacturing jobs. “Gateway cities face stubborn social and economic challenges, [and] as a result, they retain many assets with unrealized potential. These include existing infrastructure and strong connections to transportation networks, museums, hospitals, universities, and other major institutions, [and] disproportionately young and underutilized workers,” according to the 501c3 Massachusetts Institute for a New Commonwealth (MassINC). Springfield is classified as one of the 26 gateway cities in Massachusetts. MassINC analysts believe emerging small-business communities in Springfield and other gateway cities position them to “once again serve as engines driving growth in regional economies.” Milken Institute analysts Misael Galdamez, Charlotte Kesteven, and Aaron Melaas agree that Springfield could emerge as a driver of economic growth in the western Massachusetts region in the coming months. The trio of researchers authored the Milken Institute’s 2021 “Best-Performing Cities Index” report, which placed Springfield in the top 10 for Tier 4 cities in the study. Although Tier 4 cities may suffer from low-quality broadband and lower long-term growth rates, they were still considered noteworthy in the final results of the study. Study data showed Springfield’s job growth and wage growth remained on a positive trajectory although other data from the University of Massachusetts Donahue Institute indicates that more than half of renters in the area are considered “cost burdened,” meaning they spend 30% or more of their income on housing. The demand for housing is unlikely to decline in the near future; housing demand exceeded available units in 2020 by more than 11,000 units. “Much of this…can be explained by the slow

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Hartford, Connecticut

“New England’s Rising Star” City Could See Falling Home Prices Before 2022 by Carole VanSickle Ellis Hartford, Connecticut, is home to a lot of long-established locations, including the country’s oldest public art museum, the oldest publicly funded park, and the oldest continuously published newspaper. The city has also served as home to many historic figures, including Mark Twain, John M. Browning (inventor of the automatic pistol), and Alice Young, the first woman to be hanged for witchcraft in America. In 2021, the city is poised to add yet another “first” to its storied history; it may well be the first city in America to experience a post-COVID housing market correction. “The CoreLogic Market Risk Indicator (MRI)…predicts that metros such as Hartford, Connecticut…are at the greatest risk of a decline in home prices over the next 12 months,” reported 24/7 Wall St. in June. Readers should note the “greatest risk” is no guarantee of a crash or even a true correction; CoreLogic researchers assigned a probability of correction of less than 25 percent to Hartford and other similar markets. However, in a national market with a 2.4-month supply of housing inventory and double-digit year-over-year gains in value, any probability of a change in the temperature of a market is worth noting. “[Nationally] properties stayed on the market for 17 days in April, on average, and 88 percent of homes sold during that month were on the market for less than a month,” said Marco Santarelli, founder and CEO of Norada Real Estate Investments. “Most homes continue to sell faster, and the total number of homes available continues to be constrained.” Santarelli observed a “hot sellers’ real estate market in most areas of the country,” and added that Midwest and northeast housing markets “are the hottest and, together, make up 14 of the 20 hottest housing markets in the country according to Realtor.com.” By comparison, Redfin reported in May that Hartford homes remained on the market for an average of 61 days (just six days fewer than the same time in 2020). According to Redfin data, the median selling price in Hartford is currently about $215,000, down very slightly from April. Realtor.com researchers derived similar results, reporting that the 16 neighborhoods included in the metro area had skyrocketed in value by 30.9 percent year-over-year in May. Both sources reported limited inventory but noted that home sales in the area were climbing. Redfin reported 52 homes sold in May 2021 (vs. 46 in 2020), and Realtor.com reported 243 homes currently for sale in the area with 31 listed the last week in May alone. Edging Toward Equilibrium In light of this data, the emergence of Hartford on a list of markets most likely to experience a post-pandemic correction should be extremely interesting to real estate investors. Although Hartford, like the rest of the country, has experienced constrained inventory levels in 2021, local real estate professionals say there is a possibility that the market could begin edging back toward “equilibrium” by the end of the summer. “It is difficult to tell just how much demand exceeds supply,” admitted local agents Amy and Kyle Bergquist, who have been active in the area for more than a decade. They emphasized that investors hoping to make accurate predictions about the Hartford market should watch two indicators in particular: buyer frustration and listing pace. “We are always looking for clues about two key questions: How many buyers are getting frustrated with the market and opting out, and how will the pace of listing change?” the two explained. They noted that buyers are currently not necessarily “opting out” of the market but, instead, “settling in for a longer search.” This could help restore that equilibrium that might ultimately result in more opportunities for acquisition on the part of investors if there is no longer the same sense of urgency creating bidding wars and an auction mentality every time a property is listed. Given that more than half of the homes in Hartford sold for more than their asking price during Q1 2021, any equilibrium could be a positive sign for investors interested in fix-and-flip deals or long-term rentals. Hartford has also emerged from the pandemic as a burgeoning destination for remote workers and northeastern tourists. The city offers a vast array of attractions, including the former homes of literary giants like Mark Twain and Harriet Beecher Stowe, Wadsworth Atheneum (the oldest free, public museum in the U.S. and home to more than 50,000 works of art and “curiosity”), and parks like the Elizabeth Park Rose Garden and Bushnell Park. However, owning vacation rentals and short-term rentals in the area can be complicated, so investors should do their due diligence and work with a local expert before getting involved in this asset class (see sidebar). Hartford Investors Face Ongoing COVID Questions Like everywhere else in the United States, Hartford has been dramatically affected by the COVID-19 global pandemic and resultant health policy decisions made on state and local levels. In Hartford’s case, however, local policy will affect investing strategy in extremely tangible ways even after the CDC eviction bans and other national-level foreclosure moratoriums have ended. Hartford investors must factor two significant issues into their decisions about where to invest and what strategy to use: employment initiatives and local eviction policies. Unemployment improvement in Hartford and in Connecticut as a whole has been sluggish, with unemployment rates remaining stubbornly above the national average. According to the Connecticut Department of Labor, Hartford’s unemployment rate in April was still hovering just under 14 percent (not seasonally adjusted). Connecticut’s unemployment rate fell from 8.3 percent in January 2021 to 7.6 percent in April 2021, but still felt bleak compared to the national rate of 6.1 percent. However, Department of Labor research director Patrick Flaherty emphasized there are many factors in play that could help the city and state in the coming months. “Recoveries are uneven,” he said. “Evidence of increased job postings and openings suggest Connecticut is poised for larger [employment] gains

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Virginia Beach, Virginia

“Neptune City” is Ahead of the Curve, and That Could be Good News for Investors  by Carole VanSickle Ellis In Virginia Beach, Virginia, a lot of real estate metrics are heading down – but it is not the bad news you might think. In fact, Virginia Beach, also known by the nicknames “Neptune City” and “The Resort City,” could represent an exciting new market for real estate investors looking for opportunities in 2021’s white-hot housing sector. Recently dubbed one of the three “least competitive markets” in the country based on average down payment, length of time spent shopping around for a mortgage, and credit scores of homebuyers, Virginia Beach topped the list for a lack of competition. Riverside, California and Atlanta, Georgia, were second and third, respectively, and boast some of the most accessible real estate for comparable markets in the country as well as remaining relatively friendly to real estate investors. Virginia Beach also posted median list prices of “just” $305,000 at the end of April 2021, making it the fourth-most affordable housing market in the country. The average homebuyer in Virginia Beach can expect to dedicate just over 22 percent of their annual income to housing costs. Only Fort Wayne, Indiana; Wichita, Kansas; and Detroit, Michigan, can offer better numbers than that, and none of them offer the prime outdoor recreation options available “where Chesapeake Bay meets the Atlantic Ocean,” as local VB businesses like to boast. Finally, Virginia Beach housing starts were also trending downward at the start of Q2 2021, with Redfin reporting a drop of 10.5 percent year-over-year in the area. Redfin chief economist Taylor Marr credited the drop to the fact that cities with declining numbers of housing starts tend to “have less vacant land available and less space zoned for housing development.” So, why are these downtrends potentially good news for real estate investors? In the parlance of today’s housing analysts, the Virginia Beach real estate market is both “attainable” and highly desirable due, in large part, to the market’s forward movement through the “boom” that has left many areas of the country grasping desperately for both affordable and attainable housing and brought it out on the other side with relatively positive metrics for both. Thus, the downward trends actually place VB ahead of the housing cycle the rest of the nation is experiencing and positively position real estate investors to take advantage of a market with solid grounding ahead of the national curve. “Attainable housing” is a general description applied to nonsubsidized housing accessible to households earning between 80 and 120 percent of an area’s median income. Homebuyers seeking attainable housing tend to not only fall into a “gap” as far as availability of desirable housing is concerned, but they also tend to place a higher priority on trending homebuyer preferences than many developers and builders expect. This means that if homebuyer preferences are trending toward walkability or proximity to recreational greenspace, then a homebuyer with the ability to acquire attainable housing will opt to rent housing that meets their preferences rather than buy a property that does not do so. Although the COVID-19 pandemic and subsequent housing inventory crunch may have lessened that tendency slightly, markets like Virginia Beach that offer attainable housing that meets these buyers’ preferences are optimized for the post-pandemic market. Investors able to acquire existing inventory and upgrade that inventory are likely to find themselves with a highly desirable portfolio on their hands whether they elect to fix-and-flip or rehab-and-rent. Virginia Beach’s Strong Support for the Employment Base Says It All Although Virginia Beach, like much of the country, took an economic hit during the near-national lockdowns in response to the COVID-19 pandemic, the area has recovered rapidly since late summer last year. In October 2020, the area posted unemployment around 6.6 percent; by March 2021 that number had fallen to 5.8 percent and has periodically dipped lower. Although Virginia Beach mayor Bobby Dyer warned in early May that the area might continue to see relatively higher unemployment rates than other cities in the region, he credited ongoing unemployment benefits rather than a lack of opportunities for employment for that relatively high metric. “The blessing and the curse was the unemployment,” Dyer explained in a round table discussion with other mayors and public officials. “People elected not to go back to work even though they had the opportunity.” Businesses in the Virginia Beach area are both hiring and thriving, despite some worker reluctance to fill open positions. The area’s top employers are highly recession-resistant, which further solidifies the local economy. Local military bases are responsible for more than 10,000 civilian jobs, while a variety of healthcare and health science companies create another roughly 10,000 positions. Virginia Beach is a hub for international commerce, with 20 internationally based firms locating their headquarters or North American headquarters in the area, and Fortune 500 companies Dollar Tree and Huntington Ingalls both have their headquarters in the area. The Virginia Beach Economic Development Council (VBEDC) cites the city’s “numerous advantages for most companies” new to the area as a major reason the local economy continues to grow. Annual business license fees are capped at $50 for each of the first two years of operations; the state has a relatively low corporate income tax of 6 percent and has maintained that rate since 1972; and Virginia Beach offers $1,000 in tax credits per job created after the first 50 positions within a 12-month period. In a bid to attract more headquarters and larger employers, the state also offers discretionary incentive grants to companies “creating significant headquarters, administrative, or service sector operations,” the VBEDC reported. The results of these efforts are clear. CNNMoney.com Report ranked the city second on its list of “Most Business-Friendly Cities in America,” while Governing Magazine awarded it the same title in its own publication. Recently, agricultural startup Sunny Farms LLC announced it would build a $59.6 million hydroponic operation in the area, creating 155 jobs and opening

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