Newsletter – Page 80

Home Flipping Declines Again across the U.S. During Q3 as Investor Profits Hit 13-Year Low

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Nationwide Home-Flipping Rate Drops for Second Straight Quarter; Typical Profit Margins on Flips Hit Lowest Point in 13 Years; Gross Profits on Home Flips Plummet at Fastest Pace Since 2009 ATTOM, a leading curator of real estate data nationwide for land and property data, released its third-quarter 2022 U.S. Home Flipping Report showing that 92,422 single-family houses and condominiums in the United States were flipped in the third quarter. Those transactions represented 7.5 percent of all home sales in the third quarter of 2022, or one in 13 transactions. The latest portion was down from 8.2 percent, or one in every 12 home sales in the nation during the second quarter of 2022. But it was still up from 5.9 percent, or one in 17 sales, in the third quarter of last year. Despite the decline, the home-flipping rate during the third quarter of this year still stood at the third-highest level in the past decade, below the high point of 9.7 percent registered in the first quarter of 2022. “This is a classic good news/bad news report for fix-and-flip investors,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “While flipping activity in the third quarter was among the highest on record, gross profits and profit margins declined significantly, reflecting the overall pricing weakness in today’s housing market.” The report shows that as home selling by investors decreased, typical gross profits on those deals also dropped in the third quarter, hitting their lowest point in almost three years. With the national housing-market boom stalling, gross flipping profits declined in the third quarter as well at the fastest quarterly pace since 2009. More importantly, profit margins on flips also fell precipitously during the third quarter of 2022, to a point not seen in 13 years. Among all flips nationwide, the gross profit on typical transactions (the difference between the median purchase price paid by investors and the median resale price) decreased to $62,000 in the third quarter of 2022. That was down 18.4 percent from $76,000 in the second quarter of 2022 and down 11.4 percent from $70,000 in the third quarter of 2021. The latest profit figure stood at the lowest point since the fourth quarter of 2019, while the quarterly rate of decline marked the worst since early 2009. Typical profit margins, meanwhile, sank during the third quarter of this year after rising in the prior two quarters. The typical gross-flipping profit of $62,000 in the third quarter of 2022 translated into a 25 percent return on investment compared to the original acquisition price. That was down from 30.2 percent in the second quarter of 2022 and from 31.8 percent a year earlier. The typical third-quarter return on investment slumped to the lowest point since 2009 and was less than half the peak over the past decade of 53.1 percent in late 2016. So large was the fall in the third-quarter that typical returns were less than 25 percent in nearly half the metropolitan areas around the nation with enough data to analyze, compared to just a third of them earlier in 2022. Profit margins worsened in the third quarter of 2022 as median resale prices on flipped homes declined faster than they had previously when investors were buying homes. Specifically, in the third quarter of 2022, the typical resale price on flipped homes declined to $310,000. That was down 5.5 percent from $328,000 in the second quarter of 2022, although still up 6.9 percent from $290,000 a year earlier. The quarterly drop-off in median resale values was worse than the 1.6 percent decline in prices that recent home flippers were commonly seeing when they originally bought their properties. The price-change gap between buying and selling resulted in profit margins going down from the second to the third quarter of 2022. The third-quarter woes for home flippers added to the growing list of signals that the nation’s decade-long housing market boom is over – or has at least stalled – after nearly tripling home values and sending profits and equity soaring. “It’s apparent that fix-and-flip investors aren’t immune to the shifting conditions in the housing market,” Sharga noted. “With demand from buyers weakening, prices trending down over the past few months, and financing rates significantly higher than they were at the beginning of the year, flippers face a much more difficult environment today, and probably will in 2023 as well.” Home flipping rates drop in two-thirds of local markets Home flips as a portion of all home sales decreased from the second to the third quarter of 2022 in 132 of the 194 metropolitan statistical areas around the U.S. analyzed for this report (68 percent). Where rates declined, they mostly decreased by less than two percentages points. (Metro areas were included if they had a population of 200,000 or more and at least 50 home flips in the third quarter of 2022.) Among those metros, the largest flipping rates during the third quarter of 2022 were in Phoenix, AZ (flips comprised 13.7 percent of all home sales); Spartanburg, SC (13.3 percent); Atlanta, GA (12.9 percent); Winston-Salem, NC (12.7 percent) and Gainesville, GA (12.6 percent). Aside from Phoenix and Atlanta, the largest flipping rates among metro areas with a population of more than 1 million were in Memphis, TN (12.1 percent); Jacksonville, FL (11.8 percent) and Tucson, AZ (11.4 percent). The smallest home-flipping rates among metro areas analyzed in the third quarter were in Honolulu, HI (1.6 percent); Davenport, IA (3.7 percent); Rochester, NY (4 percent); Ann Arbor, MI (4 percent) and Bridgeport, CT (4 percent). Typical home flipping returns decline quarterly in four of every five metro areas The median $310,000 resale price of homes flipped nationwide in the third quarter of 2022 generated a gross flipping profit of $62,000 above the median investor purchase price of $248,000. That resulted in a typical 25 percent profit margin. Typical home flips generated less than a 25 percent profit in 91 of the 194 metros with

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More than two-thirds of prospective buyers with pets say they’d buy a home specifically because of features that cater toward their pet From adding “catios” to foregoing a home that’s not pet-friendly, many homeowners and buyers are prioritizing their furry friends when making pivotal real estate decisions. According to a new survey conducted by Realtor.com® and HarrisX among 3,001 U.S. adults, 82% of Americans with pets who are planning to buy a home within the next year consider their pets’ needs just as important, if not more so, than their own needs or those of their family. More than three-quarters (77%) of U.S. homeowners have a pet at home, and 79% of pet owners say they factored their pet in when choosing which home or apartment to live in. Pet owners looking to buy a house this year are prioritizing their pets even more, with 91% saying they’ll be a factor in their decision. “People love their pets. And they’re prioritizing the needs of these furry members of their families when choosing a home to rent or buy,” said Clare Trapasso, executive editor at Realtor.com®. “Having an animal-accessible home is more important to many pet owners than extra square footage or a shorter commute to work.” Buyers are saying, “No Pet, No Deal.”Many prospective homebuyers have decided to abandon their buying process completely if they do not find a home to accommodate their pets. Pets take priority over extra space, a short commute, and more.Some homebuyers are willing to adjust their search – and give up sought-after amenities – in order to prioritize their pets. Homeowners making “purr-fect” spaces with catios, dog doors and fenced-in yards.In some cases, homeowners have decided to take measures into their own hands by adding pet-friendly features, such as patios, dog doors and fenced-in yards, to their space. Anyone looking for a pet-friendly rental can check out the “pets” filter on realtor.com/rentals which can help you search for homes that will accept furry family members. Media Contactpress@realtor.com SOURCE Realtor.com

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CoreLogic®, a leading global property information, analytics and data-enabled solutions provider, released the Homeowner Equity Report (HER) for the third quarter of 2022. The report shows that U.S. homeowners with mortgages (which account for roughly 63% of all properties) saw equity increase by 15.8% year over year, representing a collective gain of $2.2 trillion, for an average of $34,300 per borrower, since the third quarter of 2021. Nationwide, annual home equity gains began to slow in the third quarter of 2022, with the average borrower netting $34,300, compared with the nearly $60,000 year-over-year gain recorded in the second quarter. Slowing prices also caused an additional 43,000 properties to fall underwater. The quarter-over-quarter decline in equity is partially due to cooling home price growth across the country, as annual appreciation fell from about 18% in June to just slightly more than 10% in October. As home price gains are projected to relax into single digits for the rest of 2022, then possibly move into negative territory by the spring of 2023, equity increases will likely decline accordingly in some parts of the country. “At 43.6%, the average U.S. loan-to-value (LTV) ratio is only slightly higher than in the past two quarters and still significantly lower than the 71.3% LTV seen moving into the Great Recession in the first quarter of 2010,” said Selma Hepp, interim lead of the Office of the Chief Economist at CoreLogic. “Therefore, today’s homeowners are in a much better position to weather the current housing slowdown and a potential recession than they were 12 years ago.” “Weakening housing demand and the resulting decline in home prices since the spring’s peak reduced annual home equity gains and pushed an additional number of properties underwater in the third quarter,” said Hepp. “Nevertheless, while these negative impacts are concentrated in Western states such as California, homeowners with a mortgage there still average more than $580,000 in home equity.” Negative equity, also referred to as underwater or upside-down mortgages, applies to borrowers who owe more on their mortgages than their homes are currently worth. As of the third quarter of 2022, the quarterly and annual changes in negative equity were: Because home equity is affected by home price changes, borrowers with equity positions near (+/- 5%), the negative equity cutoff, are most likely to move out of or into negative equity as prices change, respectively. Looking at the third quarter of 2022 book of mortgages, if home prices increase by 5%, 127,000 homes would regain equity; if home prices decline by 5%, 172,000 properties would fall underwater. The next CoreLogic Homeowner Equity Report will be released in March 2023, featuring data for Q4 2022. For ongoing housing trends and data, visit the CoreLogic Intelligence Blog: www.corelogic.com/intelligence. Source: CoreLogic Contacts Media Contact:Robin Wachnernewsmedia@corelogic.com

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Foreclosure Activity Remains Up 57 Percent from Last Year, and Foreclosure Starts Increase Annually by 98 Percent; But Both Measures Down from October 2022 ATTOM, a leading curator of real estate data nationwide for land and property data, released its November 2022 U.S. Foreclosure Market Report, which shows there were a total of 30,677 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions – up 57 percent from a year ago, but down 5 percent from the prior month. “We may be at or near a peak level of foreclosure activity for 2022,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “While foreclosure starts and foreclosure completions both increased compared to last year’s artificially low levels, they declined from last month, and lenders often put a moratorium on foreclosures during the holiday season.” Highest foreclosure rates remain in Illinois, Delaware, and New Jersey Nationwide one in every 4,580 housing units had a foreclosure filing in November 2022. States with the highest foreclosure rates were again: Illinois (one in every 2,401 housing units with a foreclosure filing); Delaware (one in every 2,736 housing units); New Jersey (one in every 2,916 housing units); South Carolina (one in every 3,195 housing units); and Wyoming (one in every 3,237 housing units). Among the 223 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in November 2022 were Cleveland, OH (one in every 1,913 housing units with a foreclosure filing); Columbia, SC (one in every 1,938 housing units); Davenport, IA (one in every 2,000 housing units); Bakersfield, CA (one in every 2,034 housing units); and Atlantic City, NJ (one in every 2,063 housing units). Those metropolitan areas with a population greater than 1 million, with the worst foreclosure rates in November 2022, including Cleveland, OH were: Chicago, IL (one in every 2,221 housing units); Riverside, CA (one in every 2,294 housing units); and Philadelphia, PA (one in every 2,539 housing units). Foreclosure completions up 64 percent from last year Lenders repossessed 3,770 U.S. properties through completed foreclosures (REOs) in November 2022, down 9 percent from last month but up 64 percent from last year. States that had the greatest number of REOs in November 2022, included: Illinois (343 REOs); New York (313 REOs); Pennsylvania (220 REOs); Michigan (210 REOs); and Ohio (208 REOs). Those major metropolitan statistical areas (MSAs) with a population greater than 1 million that saw the greatest number of REOs in November 2022 included: Chicago, IL (278 REOs); New York, NY (174 REOs); Philadelphia, PA (103 REOs); Detroit, MI (77 REOs); and Houston, TX (59 REOs). Greatest number of foreclosure starts still in California, Texas, and Florida Lenders started the foreclosure process on 20,686 U.S. properties in November 2022, down 5 percent from last month but up 98 percent from a year ago. “Foreclosure starts in November nearly doubled from last year’s numbers, but are still just above 80 percent of pre-pandemic levels,” Sharga added. “We may continue to see below-normal foreclosure activity, since unemployment rates are still very low, and mortgage delinquency rates are lower than historical averages.” States that had the greatest number of foreclosure starts in November 2022 again included: California (2,244 foreclosure starts); Texas (2,114 foreclosure starts); Florida (1,709 foreclosure starts); New York (1,575 foreclosure starts); and Illinois (1,243 foreclosure starts). Those major metropolitan areas with a population greater than 1 million that had the greatest number of foreclosure starts in November 2022 included: New York, NY (1,593 foreclosure starts); Chicago, IL (1,028 foreclosure starts); Houston, TX (685 foreclosure starts); Miami, FL (657 foreclosure starts); and Los Angeles, CA (642 foreclosure starts). Media Contact:Christine Stricker949.748.8428christine.stricker@attomdata.com

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HPSI Breaks Consecutive-Decline Streak but Remains Just Above All-Time Low The Fannie Mae Home Purchase Sentiment Index® (HPSI) increased 0.6 points in November to 57.3, its first increase in nine months, though it remains just above the all-time low set last month and significantly lower than its level at this time last year. Four of the index’s six components increased modestly month over month, including those associated with homebuying and home-selling conditions; however, both remain well below year-ago levels, having declined on net 28 and 38 points, respectively. Elevated mortgage rates continue to constrain affordability, and 62 percent of respondents expect mortgage rates to rise even further over the next year, compared to only 10 percent who expect rates to decline. Year over year, the full index is down 17.4 points. “Both consumer homebuying and home-selling sentiment are significantly lower than they were last year, which, in our view, is unsurprising considering mortgage rates have more than doubled and home prices remain elevated,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Following eight months of consecutive declines, the HPSI did tick up slightly in November but is essentially unchanged since hitting its all-time low last month. Consumers continue to expect mortgage rates to rise but home prices to decline, a situation that we believe will contribute to a further slowing of home sales in the coming months, as both homebuyers and home-sellers have reason for apprehension. We expect mortgage demand to continue to be curtailed by affordability constraints, while homeowners with significantly lower-than-current mortgage rates may be discouraged from listing their property and potentially taking on a new, much higher mortgage rate.” Home Purchase Sentiment Index – Component Highlights Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased in November by 0.6 points to 57.3. The HPSI is down 17.4 points compared to the same time last year. Read the full research report for additional information. About Fannie Mae’s Home Purchase Sentiment IndexThe Home Purchase Sentiment Index® (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey® (NHS) into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier. Fannie Mae Newsroomhttps://www.fanniemae.com/news

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Provides end-to-end acquisition, asset management, maintenance and resident care for BFR and SFR rentals nationwide Build-for-Rent (“BFR”) commercial real estate investment firm SVN | SFR Capital Management (“SVN | SFR”) announced it has entered into a joint venture agreement to acquire, own and operate rental homes with Marketplace Homes, a national brokerage and property management company. The joint venture will operate under the ‘Curbside Residential’ brand and integrate Marketplace Homes’ end-to-end property management, asset management, leasing, maintenance and resident service solutions with SVN | SFR’s national BFR acquisition and SFR/BFR operating platform with new construction builders and SFR/BFR asset management support. “With the residential rental home sector experiencing unprecedented national investor and consumer demand, we believe now is the time to invest in SFR and BFR portfolios,” said Jeff Cline, CEO of SVN | SFR Capital Management. “Marketplace Homes’ depth in marketing, lease-up, maintenance and importantly, resident care, will deliver unmatched daily operations and instill the sense of community we strive for so rental residents stay happy and enjoy the community they live in longer.” With increasing home mortgage rates, the national demand for affordable single-family rental housing and BFR communities is at an all-time high across population segments (including millennials, young families with children and baby boomers), all of whom are seeking space, location and professional home management. According to John Burns Real Estate Consulting, national (99 market roll-up) single-family rents are up +6.5% YOY as of July 2022 and new lease rents for the top 20 SFR markets are up +10.1% YOY. As rental home demand increases across the U.S., so does the demand for experienced asset and property management professionals by pension funds and investors who are bullish on large-scale rental housing investments. “The combined deal flow, large national footprint and local operating capabilities between SVN | SFR and Marketplace Homes creates a JV that is scaling quickly and efficiently,” said William Dickson, president of Marketplace Homes. “There’s a lot of competition in SFR and BFR right now, but this is a partnership that will stand out for its unique acquisition pipeline, professional property management and vertical integration.” SVN | SFR also recently announced joint ventures with several homebuilders and land developers for the new construction of several thousand homes annually in BFR communities over the next several years. The first purpose-built residential communities are slated to commence development in 2023 in Texas and several other states. About Marketplace Homes Marketplace Homes is a national brokerage and property management company. The brokerage sells primarily new construction homes focusing on solving contingency problems. The property management division works with investors of all sizes to acquire, rehab, lease, maintain and sell investment properties in dozens of states. Marketplace Homes leverages its infrastructure, technology, processes and relationships to solve real estate’s hardest problems. Marketplace Homes has also sourced, underwritten and funded over 2,000 multi-family units currently under construction across the US. For more information, visit www.marketplacehomes.com. About SVN | SFR Capital Management SVN | SFR Capital Management, (“SVN | SFR”), based in New York, is a private, commercial real estate investment firm dedicated to investment in the Build-for-Rent (“BFR”) asset class across the U.S. SVN International Corp. (“SVNIC”), a globally recognized, Boston-based, full-service CRE advisory firm, is an affiliated entity. Through structured homebuilder joint ventures, SVN | SFR plans to acquire and aggregate approximately 35,000+ new construction, BFR homes in the near-term, through an initial capital raise of several billion in equity and debt capital, for eventual disposition at stabilization as a large-scale institutional rental home portfolio. For more information call 602.466.1381 or email SFRCapitalManagement@svn.com.