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The Housing Hunger Games

Why Speed Has Never Mattered More By Jason Simpson Anyone keeping a pulse on real estate can likely relate to the famous line from the movie Hunger Games, “May the odds be ever in your favor.” Never has this been truer than in today’s single-family rental (SFR) real estate investment market. As demand for affordable homes surges, investors and individuals alike face extraordinary economic conditions and unforeseen challenges in securing properties. In this high-stakes environment, it seems like a contest, where success hinges on being there first to outpace the competition. The Current Reality of Real Estate Investing The inventory and availability of existing stock homes is dwindling rapidly while prices are scaling to insurmountable heights, and yet competition grows fiercer daily. Taking a few beats back to arguably our nation’s greatest leader, Abraham Lincoln, his wisdom holds true in today’s SFR real estate investment market: “Things may come to those who wait, but only the things left by those who hustle.” Young, first-time homebuyers, primarily in the 18-34 age bracket, vie for entry-level properties priced at a record high of $243,000 in 2023 according to the National Association of Realtors (NAR) and Redfin. With 77 million Americans from the Millennial and Gen Z cohorts hunting and hustling for starter homes, demand has soared to historic levels. Adding to the complexity, investors are also eyeing these affordable properties, with a staggering one in every four homes (26%) in this category now under investor ownership according to Redfin — a trend showing no signs of slowing down. Consequently, the delicate balance between supply and demand has been severely skewed, with active listings across the U.S. plummeting to (nearly) record lows according to the latest Federal Reserve Economic Data (FRED). This inventory scarcity is coupled with historically high prices — $417,500 the current median, also according to FRED data. In addition, FRED data also reveals fewer than half of all (severely low supply) for-sale homes are in the affordable sweet-spot of starter home prices (avg. $215,000). Meaning, precious few starter homes are now also being simultaneously hunted by 77 million young Americans and investors too. Speed Reigns Supreme In this ruthless environment, where competition mirrors the intensity of the Hunger Games, speed reigns supreme. The solution lies in stimulating supply by incentivizing homeowners to “trade up,” thereby releasing more starter homes into market supply. While lower mortgage rates and innovative financing options may offer some help, the immediate imperative is crystal clear: act quickly to secure properties before your competitors do. To thrive, investors must embrace technologies and services that streamline acquisitions. From identifying opportunities to conducting due diligence and crafting offers, every link in the acquisition chain must be fine-tuned for efficiency. By compressing the acquisition cycle and minimizing turnaround times, investors can secure a pivotal advantage. This points to instant listing alerts and access to on-demand inspection resources, creating a rapid-response team ready to secure essential diligence insights and imagery for swift offer decisions. A team on the ground is also essential in optimizing speed-to-offer, especially for remote investors who can’t perform inspections themselves. Without a highly trained (and scalable) team—ready to mobilize as purchase opportunities arise—competitors will dominate and seize the better properties. Readily available financing and offer capabilities are paramount to capitalizing on opportunities, as success in real estate investing boils down to a singular principle: speed. Those who move swiftly and adapt to a shifting market will triumph. Not only is speed to acquisition essential, but speed to fill vacant homes with renters is equally important. Vacancy becomes a crushing element on any investor’s P&L and having resources ready to inspect and rehabilitate a property to put new renters under contract also becomes a key component of speed in your business cycle. A defining feature of today’s real estate landscape is the staggering level of demand for affordable housing, particularly among younger demographics. Millennials and Gen Z comprise a significant portion of the population and are driving the surge in demand for entry-level properties. Often new in their careers, they face student debt and strive to achieve the American Dream of homeownership but are met with fierce competition, limited supply, historically high prices, and interest rates not seen since the first Bush administration. This creates a cocktail of competition for when the limited supply of homes does come open in their price range. Simultaneously, investors, recognizing the potential for lucrative rental returns and low vacancy rates at this high-volume price point are turning their attention to the lower end of the market. The allure of affordable properties, coupled with the promise of rental income or appreciation, has spurred an influx of investment activity. As a result, starter homes once sought after by first-time buyers, are now subject to intense competition from cash-rich investors, further exacerbating the challenges faced by aspiring homeowners. Temper Speed with Prudence and Foresight With these obstacles, agility is key. Time matters and those who hesitate get left behind in the property race. Rushing into transactions without due diligence leads to costly mistakes and missed opportunities. Thus, investors must balance expediency and thoroughness, leveraging technology and data-driven insights to make decisions. Technology is an indispensable tool for real estate professionals seeking a competitive edge. Immersive visual data, advanced analytics, AI, and ML algorithms empower investors to identify opportunities, assess risk, and transact with efficiency and precision. Plus, digital platforms and mobile applications offer seamless access to real-time market data, enabling investors to stay informed and agile in an ever-evolving landscape. Crowdfunding platforms and online marketplaces have also democratized access to investment opportunities, allowing individual investors to participate in projects once exclusive to institutional players. This landscape diversifies capital sources and fosters innovation and entrepreneurship. Nevertheless, amidst the proliferation of technology, it’s essential to remember that real estate investment remains rooted in human relationships and local knowledge. While data and analytics provide valuable insights, they must be complemented by a nuanced understanding of market dynamics, regulatory frameworks, and socio-cultural factors that shape the local

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Unlocking the Potential

Single Family vs. Multifamily Investments By Jennifer Stoops Investing in rental properties is a strategic move for those seeking to build wealth through real estate. However, the decision between single-family and multifamily units is not a one-size-fits-all scenario. It requires careful consideration of various factors, including investment goals, risk tolerance, and market dynamics. In this comprehensive guide, we delve deeper into the pros and cons of each option to help you make an informed decision and maximize your returns. Assessing Investment Strategies When embarking on the journey of real estate investment, it is crucial to align your strategy with your financial goals and timeline. Single-family homes offer the advantage of quicker appreciation, making them attractive for investors seeking short-term gains. On the other hand, multi-family properties provide a long-term investment opportunity, with the potential for stable cash flow and sustained growth. Understanding your investment horizon is essential in determining which option best suits your needs. Evaluating Exit Strategies Before diving into the real estate market, it is essential to have a clear exit strategy in mind. For investors looking to capitalize on short-term gains, single-family homes may be the preferred choice. With the right property and a reliable tenant, you can leverage the property’s appreciation to maximize returns in a relatively short period. Conversely, multifamily properties offer a more gradual appreciation but provide a steady stream of rental income over time. Assessing your investment goals and risk tolerance will help you determine the optimal exit strategy for your investment. Loan Requirements Regardless of whether you opt for a single-family or multifamily property, navigating the loan requirements is a critical aspect of real estate investment. Most lenders view rental properties as business ventures, resulting in higher interest rates and stricter lending criteria compared to traditional mortgages. Plan to allocate at least 20% of the purchase price as a down payment and ensure that your investment yields a return of at least 1% of the total purchase price per month to generate a decent profit. Contrasting Property Dynamics Single-family and multifamily properties differ in their valuation methods and market dynamics. While single-family homes are typically assessed based on their property value, multifamily units are valued based on the rental income they generate. Understanding these distinctions is crucial for evaluating investment opportunities and making informed decisions. Pros and Cons of Single-family Homes Single-family homes offer several advantages, including:  »         Tenant Stability // Properties located in desirable neighborhoods often attract long-term tenants, providing a stable source of rental income.  »         Short-term Appreciation // Single-family homes tend to appreciate more quickly than multifamily properties.  »         Lower Acquisition Costs // Single-family homes are generally less expensive to acquire, making them accessible to investors with modest capital. However, there are also drawbacks to consider, such as:  »         Limited Scalability // Investing in single-family homes may limit your ability to scale your portfolio compared to multifamily properties.  »         Tenant Dependency // Relying on a single tenant poses income limitations, with vacancies resulting in revenue loss. Pros and Cons of Multifamily Homes Multifamily properties offer unique advantages, including:  »         Lower Cost Per Unit // Multifamily properties often trade at a lower price per unit, offering better economies of scale and higher potential returns.  »         Diversified Income Streams // With multiple units, multifamily properties provide diversified rental income streams, reducing the risk associated with vacancies.  »         Ability to Scale Portfolio // Multifamily properties are conducive to portfolio growth, allowing investors to achieve scale more efficiently compared to single-family homes. However, multifamily properties also present challenges, such as:  »         Higher Property Taxes // Multifamily units typically incur higher property taxes, impacting overall profitability.  »         Management Complexity // Managing multiple units can be more challenging and may require third-party property management, increasing operating expenses. Additional Considerations In addition to the core factors discussed above, there are several other considerations to keep in mind when choosing between single-family and multifamily investments:  »         Market Affordability // Evaluate the affordability of the market and consider the cost per unit relative to rental income potential.  »         Market Demographics // Analyze the demographics of the local market, including the proportion of renters versus homeowners and the demographic profile of renters.  »         Scale // Consider the scalability of each investment option and assess your ability to manage and grow your portfolio over time. Market Trends and Opportunities Keeping an eye on market trends and identifying emerging opportunities can significantly impact your investment success. In recent years, multifamily real estate has witnessed a surge in demand due to changing demographic trends, such as an increase in millennial renters and a growing preference for urban living. This shift has led to a rise in multifamily development projects and presents lucrative opportunities for investors looking to capitalize on the rental market’s momentum. Conversely, single-family homes continue to be a staple of the housing market, offering stability and potential appreciation in suburban and rural areas. Understanding these market dynamics can help you align your investment strategy with evolving consumer preferences and maximize your returns. Risk Management Strategies Mitigating risks is a crucial aspect of real estate investment. While both single-family and multifamily properties offer attractive returns, they also come with their unique set of risks. For single-family homes, tenant turnover and vacancy rates can impact cash flow, while multifamily properties face challenges such as tenant disputes and property management complexities. Implementing effective risk management strategies, such as thorough tenant screening processes, proactive maintenance plans, and contingency funds, can help safeguard your investment. By identifying and addressing risks upfront, you can navigate market fluctuations and protect your investment portfolio. Tax Implications and Financial Planning Understanding the tax implications of real estate investment is essential for optimizing your financial strategy. Both single-family and multifamily properties offer various tax benefits, such as depreciation deductions, mortgage interest deductions, and property tax deductions. However, the tax treatment of rental income and capital gains may vary depending on the property type and ownership structure. Consulting with a tax professional and incorporating tax-efficient strategies into your financial planning

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2024 State of Homebuying Report

Opportunities, Challenges Await Investors By Joseph Ticchione A new generation has emerged, showing readiness and eagerness to buy despite the recently volatile housing market. Gen Z—born between 1997 and 2012—is eager and willing to purchase their first home, while being more tolerant of relatively higher interest rates than older generations. However, data from ServiceLink’s 2024 State of Homebuying Report (SOHBR) shows Gen Z — and even their slightly older counterparts, Millennials, who are still making their move — are not looking for the typical starter home. They’re seeking a larger home with more space that features tech upgrades and amenities. For investors, this all points to added competition when it’s time to buy, but also a growing opportunity to explore fix-and-flip projects. In March, ServiceLink released its annual report, which features data from a survey of 1,519 individuals who either purchased or attempted to purchase a home in the last four years. The report provides year-over-year data that reflects generational trends among buyers, including desire to purchase, attitudes related to alternative paths and the role technology plays in the process. It is clear that there are evolving opportunities and challenges for investors in the current market. Here is a look at what we found. Competition to Buy Despite the dramatic ups and downs of the housing market over the last four years, many still have a strong desire to purchase a home. Of those surveyed for the 2024 SOHBR, 47% of respondents said they plan to purchase a home this year. For the first time in the survey’s history, Gen Z rose to the top when it came to home purchasing plans. Sixty-three percent of Gen Z respondents said they want to buy this year. Millennials—born between 1981 and 1996 — were right behind, with 59% looking to purchase in 2024. For investors, the market has been tough with the high cost of capital coupled with high interest rates. But as rates are likely to soften, the market may become more appealing. With a new generation looking to enter the market, there will be added competition, specifically from current renters who now want to buy. When asked if they planned to buy or continue renting in 2024, 69% of current renters said they plan to buy this year, along with 70% of those living rent-free, possibly with parents or family members. Add in the 34% of current homeowners who are looking for a home and tight housing stock, and competition could be fierce. Fix and Flip Opportunity While Gen Z and Millennials are ready to buy, they also have very specific desires. SOHBR findings indicate they want bigger homes that feature technology upgrades. Across responses from all generations, 43% said they want a larger home with more space, 35% said they want more room between their home and a neighbor and added yard space, and 30% said they want both recently updated kitchens and bathrooms and homes with technology upgrades. On the opposite end, aside from financial constraints and high interest rates which respondents said was the biggest reason they abandoned the homebuying process in the past 12 months, the largest dealbreaker for those looking to buy this year is a home being too small. This could be an opportunity for investors to fix and flip, turning existing housing stock that could be on the back burner into a more desirable purchase that today’s youngest generations will jump at. Investors also could take existing housing stock and make upgrades to convert the home into a more tech friendly space. Ask yourself: Can I add space to this home? Can I add technological upgrades that will make this home more valuable? If you can make the property special enough, there’s a lot of opportunity here. Utilize Technology to Your Advantage Technology in the mortgage space continues to grow and buyers are ready to take advantage. SOHBR data indicates that 60% of those who purchased a home in the last four years utilized eSign technology, up from 48% in 2023. Also 50% applied for a mortgage online and 40% scheduled an appraisal or closing digitally. For investors, technology can also be a great resource. Utilizing the latest technology can help lower costs and make investing easier, along with providing greater visibility into the process and market. Finding the right partner is key. You want to work with an organization like ours that provides automated, lower cost services, which can increase efficiency and save you money. Tightening in the auction space Buyers who are striking out in the traditional market are increasingly looking at auction to purchase their primary residence. SOHBR data indicates the appeal for today’s buyers in the auction market is a potential cost savings, being able to bid on a home remotely, having a faster homebuying process and added transparency. While just 33% of those surveyed in 2022 said they were willing to buy at auction, that number has continually rose, to 40% in 2023, and 54% in 2024. The younger generations — Gen Z and millennials — are the ones with the greatest interest (67% and 64%, respectively), and the majority want the property to serve as their primary residence. For investors, this goes back to competition. There is a larger pool of people looking at this space, so, as ServiceLink’s Amy Daniel, senior vice president, previously pointed out, it’s even more vital to sharpen your pencils and make sure the property makes sense for you and to find that right fit in a partner. Growing equity With rising home prices, many homeowners have seen increased equity. Nineteen percent of SOHBR respondents this year reported having more than $200,000 in home equity and another 15% percent said they have more than $100,000 in home equity. In total, that’s 34% of all respondents who have at least $100,000 in home equity, up from 21% in 2023. For investors, you’re likely seeing your equity in current properties soar as well. Now is a good time to evaluate your portfolio and

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California’s Quest to Push Housing Even Further Out of Reach

Renting Must be Part of the Solution By David Howard Make no mistake: It is a difficult time for homebuyers right now, and California stands out as one of the nation’s toughest states to buy a home. It’s not just that home prices are hitting an all-time high, and that California features some of the least affordable housing markets in the country. High interest rates mean that even families that have enough for a down payment will be left with expensive, budget-busting mortgage payments. Experts are declaring right now as ‘the worst time to buy a home.’ Millennials in California have growing families, and they are going to need more housing options — not less. But even as many families are locked out of buying a home, California policymakers are pushing for new laws that would also make it harder for them to find places to rent. Renting must be part of the solution. Daunting Numbers To keep up with its growing population, California needs to build 180,000 homes per year. However, over the last decade, it’s averaged less than 80,000 new homes per year. On top of this, California has less land available for development, meaning a variety of housing solutions are needed including multifamily and single-family rental properties. Across California, it is cheaper to rent than to buy. For young professionals and growing families, renting likely makes more sense from both a financial and a convenience perspective. Renting can save tens of thousands of dollars throughout a year in California where on average, the difference between renting and buying a home is $803 per month — not including insurance, taxes, and other homeownership expenses. By some estimates, California renters could save $112,000 or more over five years given the cost difference to rent versus buy. For higher cost of living areas like Los Angeles, San Jose and San Franciso the difference can be even greater. For decades, renting has been synonymous with apartment buildings. The truth is many growing families need more space, but the only pathway to renting a single-family home is dealing with mom-and-pop owners who may not be great caretakers. Today, housing providers are offering a new solution to California families: professionally-managed single-family homes in desirable neighborhoods where families can be close to their jobs and good schools. These companies make upfront investments to renovate homes; they stay in touch with residents through apps, and they employ teams of on-the-ground maintenance staff who can quickly respond for repairs. Companies also offer high quality amenities and features that are not typically available for a first-time home buyer. Families who rent with these housing providers are finding the right home that meets their needs, circumstances, and budget. For potential critics, it’s important to point out that single-family rental housing has no impact on the supply or cost of housing, a fact backed by research from the Philadelphia Federal Reserve and the University of Southern California. Additionally, research from the Urban Institute has found that roughly 574,000 single-family homes are owned by large companies or investors — just about 1% of the more than 46.6 million total rental properties available nationwide. AB 2584 and SB 1212 So, why are some California legislators doing their very best to limit single-family rental housing? AB 2584 and SB 1212 propose burdensome regulations to the housing market that are both anti-renter and anti-housing. By scapegoating single-family rental housing providers, it ignores the root causes for housing market issues in California and threatens to remove a vital housing option for those living in or interested in moving to the state. Despite the highly beneficial nature of single-family rentals, California is losing ground on this critical housing solution. Between 2017 and 2022, the number of single-family rentals dropped by 81,548 units, according to Census data. When combined with the prospect of proposed regulations, the result would exacerbate, not improve the housing situation in the state — limiting investment in rental properties and stifling new housing construction. Legislators should be laser-focused on making housing as accessible as possible, encouraging policies that make it easier to buy and easier to rent. Californians need access to more single-family homes, especially in growing and high-demand communities.

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Nearly 40% of Homeowners Couldn’t Afford Their Home Today

Home Prices Have Doubled Over the Last Decade By Dana Anderson, Redfin Nearly two of every five (38%) homeowners do not believe they could afford to buy their own home if they were purchasing it today.  This is according to a Redfin-commissioned survey of roughly 3,000 U.S. residents conducted by Qualtrics in February 2024. The relevant question was: “If you were looking to purchase a home, do you think you could afford a home like yours in your neighborhood today?” Nearly three in five (59%) homeowners who answered this question have lived in their home for at least 10 years, and another 21% have lived in their home for at least five years. That means the majority of respondents have seen housing prices in their neighborhood skyrocket since they purchased their home: The median U.S. home-sale price has doubled in the last 10 years, and has shot up nearly 50% in the last five years alone.  Home prices have soared over the last decade for several reasons. Already-high home prices skyrocketed during the pandemic, when remote work and ultra-low mortgage rates motivated many Americans to move and buy homes. Even before the pandemic buying boom, home prices were increasing due to a prolonged supply shortage, along with a strong labor market and growing population pushing up demand.  Rising mortgage rates are another reason many homeowners could not afford their own home if they were to buy it today. The typical person purchasing today’s median-priced home for $420,000 has a record-high $2,864 monthly housing payment with a 7.1% mortgage rate, the current 30-year fixed-rate average. If they were to purchase a home for the same price with a 4% mortgage rate, which was common in 2019, their monthly payment would be $2,210, roughly $650 less. “Rising home prices are a double-edged sword. On the one hand, Americans who already own homes benefit from rising values and they can consider themselves lucky they broke into the housing market while they could still afford it.” said Redfin Senior Economist Elijah de la Campa. “On the other hand, price appreciation makes the prospect of buying a new home daunting or even impossible for many people who want to move. Prices have risen enough that a similar home and location would be much pricier than a home someone already owns–even accounting for inflation. Add elevated mortgage rates to the equation, and moving up to a bigger, better home is even more costly and perhaps out of reach.” The situation is especially dire for first-time buyers, who have not built up equity from the sale of a previous home. Nearly 40% of U.S. renters don’t believe they’ll ever own a home, up from 27% last year. Of the Gen Zers and millennials who do expect to buy their first home soon, more than one-third (36%) expect to use a cash gift from family to help with their down payment.  Broken Down by Generation Baby boomers are least likely to be able to afford their current home if they were to buy it today. Nearly half (45%) of baby boomers said they could not afford a similar home in their neighborhood now, compared to 39% of Gen Xers and 24% of Gen Zers and millennials. That stands to reason, as baby boomers are more likely to have bought their home a long time ago for a much lower price. That dynamic contributes to the shortage of homes for sale: Empty-nest baby boomers own twice as many large homes nationwide as millennials with kids, largely because older Americans, with no financial incentive to sell, are hanging onto their homes.  Unsurprisingly, lower-income homeowners are least likely to be able to afford their own home today. More than half (51%) of respondents earning under $50,000 annually would not be able to afford their home, compared to 34% of people earning $50,000-$100,000 and 21% of people earning more than $100,000.

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Foreclosure Activity Increases in Q1 2024

Bank Repossessions Up 7% By ATTOM Team ATTOM, a leading curator of land, property, and real estate data, released its Q1 2024 U.S Foreclosure Market Report, which shows a total of 95,349 U.S. properties with a foreclosure filing during the first quarter of 2024, up 3% from the previous quarter but down less than 1% from a year ago. The report also shows a total of 32,878 U.S. properties with foreclosure filings in March 2024, down less than 1% from the previous month and down 10% from a year ago. “Q1 2024’s foreclosure data reveals a market in transition, with slight increases in filings and starts, alongside a notable decrease in REO properties,” explains Rob Barber, CEO at ATTOM. “While foreclosures remain relatively stable, we are closely monitoring these trends. Homeowners continue to hold significant equity, contributing to a persistently hot housing market.” Foreclosure Starts Increase Nationwide A total of 67,657 U.S. properties started the foreclosure process in Q1 2024, up 2% from the previous quarter and up 4% from a year ago. States that had 100 or more foreclosures starts in Q1 2024 and saw the greatest quarterly increase included:  » New Hampshire (up 43%)  » Illinois (up 26%)  » Florida (up 22%)  » Rhode Island (up 21%)  » Nevada (up 16%) Those major metros with a population of 200,000 or more that had the greatest number of foreclosures starts in Q1 2024 included:  » New York, New York (4,404 foreclosure starts)  » Houston, Texas (2,977 foreclosure starts)  » Chicago, Illinois (2,867 foreclosure starts)  » Los Angeles, CA (2,398 foreclosure starts)  » Miami, FL(2,319 foreclosure starts) Highest Foreclosure Rates in DE, NJ, and SC Nationwide, one in every 1,478 housing units had a foreclosure filing in Q1 2024. States with the highest foreclosure rates were:  » Delaware (one in every 894 housing units with a foreclosure filing)  » New Jersey (one in every 919 housing units)  » South Carolina (one in every 929 housing units)  » Nevada (one in every 961 housing units)  » Florida (one in every 973 housing units) Among 224 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in Q1 2024 were:  » Columbia, South Carolina (one in every 569 housing units)  » Spartanburg, South Carolina (one in 597)  » Lakeland, Florida (one in 624)  » Atlantic City, New Jersey (one in 628)  » Cleveland, Ohio (one in 662) Other major metros with a population of at least 1 million and foreclosure rates in the top 15 highest nationwide, included:  » Cleveland, Ohio at No.5  » Riverside, California at No. 9  » Orlando, Florida at No.10  » Las Vegas, Nevada at No. 13  » Jacksonville, Florida at No. 15 Bank Repossessions Increase 7% Lenders repossessed 10,052 U.S. properties through foreclosure (REO) in Q1 2024, up 7% from the previous quarter but down 20% from a year ago. Those states that had the greatest number of REOs in Q1 2024 were:  » Michigan (1,049 REOs)  » California (845 REOs)  » Pennsylvania (838 REOs)  » Illinois (810 REOs)  » Texas (596 REOs). Average Time to Foreclose Increases 2% Properties foreclosed in Q1 2024 had been in the foreclosure process for an average of 736 days. While this marks a slight increase from the previous quarter, it represents a 20% decrease from the same time last year, continuing a downward trajectory observed since mid-2020. States with the longest average foreclosure timelines for homes foreclosed in Q1 2024 were:  » Louisiana (2,641 days)  » Hawaii (2,031 days)  » New York (1,958 days)  » Nevada (1,701 days)  » Kentucky (1,701 days). States with the shortest average foreclosure timelines for homes foreclosed in Q1 2024 were:  » Montana (123 days)  » Virginia (152 days)  » Texas (163 days)  » Wyoming (191 days)  » West Virginia (217 days)

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