In this article

Although having a robust college presence is a massive benefit for its parent city, other metrics should be considered when analyzing long-term real estate investment potential.

In the 1980s, many of the Rust Belt cities in the Midwest suffered a huge economic decline when the steel mills closed down. In Pittsburgh, for example, home to notable universities such as Carnegie Mellon, the University of Pittsburgh, Duquesne, and others, 75% of the steel industry closed, causing 153,000 workers to lose their jobs in the mid-1980s and the city to lose 8% of its population throughout the decade. The result was devastating to Pittsburgh’s economy. 

A vibrant city should have a broad spectrum of businesses and industries, so if one significant employer moves out, it should still be able to survive and thrive. Looking at college towns with a long-term view to investing, many of the metrics point to the same data we have seen since the pandemic: Generally expensive states such as New York and California are losing population to the Sun Belt, where the cost of living is lower fueled by lower taxes and house prices—not to mention less heating costs. 

Although the decline appears to have slowed in 2023, possibly due to more workers recalled to on-site employment, overall the North is losing while the South is gaining population. According to the U.S. Census, four Southern states—Texas, Florida, North Carolina, and Georgia—accounted for 93% of the nation’s population growth in 2022 and 67% in 2023. 

Many of the people who moved south are not returning north. The lure of more jobs, lower taxes, and cheaper land has also caused many companies to locate their headquarters in the South, particularly in the electric vehicle (EV) industry and other manufacturing sectors. 

Thus, it’s hardly surprising that three of the top four college markets with the most significant growth potential are in Texas, and nine out of the top 10 are in the South. Here’s a deeper look into the top four.

Tuscaloosa, Alabama

The metrics that made Tuscaloosa the top RTP (rent-to-price ratio) college town are also why it has the best solid growth potential. Its YoY population growth is a robust 3.99%, its price growth is close to 2%, and its rental growth is 6.79%. 

Like other smaller American cities enjoying a boom in car manufacturing with the onset of EVs, one of the city’s largest employers is Mercedes-Benz, which accounts for 4,500 people. However, the University of Alabama is the city’s biggest employer, with 6,839 workers—two stable hubs of employment that appear to insulate it from an unpredictable economy.

At the time of this writing, Realtor.com shows more than 800 properties for sale, with the vast majority being under $300,000 (the median sold home price is $254,900). Ranch-style single-family homes and small apartment buildings make up the majority of rental stock (there are 262 currently available). 

The average rent of $1,319 means that this is a great city to invest in, with the ability to scale quickly due to the cash flow, price appreciation, and low barrier to entry. A potential interest rate dip will also help fuel future investing.

College Station, Texas

The home of Texas A&M University enjoys similar stats to Tuscaloosa, with one notable exception: YoY price growth is a healthy 3.45%, outperforming the Alabama city. 

Part of that is due to its large number of potential employers and diversity of businesses, which are spread across education, food, government, healthcare, biotech, and manufacturing. There are currently about 800 homes for sale in the region, with a median sold home price of $309.400 and an average rental price of $1,553, making it slightly less cash-positive than Tuscaloosa but still a good place to invest due to its other stats.

Austin, Texas

Austin’s price growth has shrunk dramatically over the last year, by -7.32%. Its rent growth has also dropped by -2.6%. That’s because Austin—known as the “Silicon Valley of the South”—experienced dramatic price appreciation during the pandemic. 

“There was an explosion of activity in Austin that just got too hot,” Redfin chief economist Daryl Fairweather told Newsweek in November 2023. “And then there needed to be a correction.”

With tech companies like Alphabet’s Google and Facebook parent Meta Platforms having offices in Austin, pandemic remote working saw the city experience a deluge of transplants from more expensive cities on both coasts. The increase in interest rates has seen inflated prices go into free fall. 

There are currently just over 5,000 homes for sale in Austin, with a median sold home price of $499.400. The average rental price in the city is $1,753, which makes it challenging to rent for cash flow at the moment.

However, once prices settle, Austin could still be a good place to invest in the long term due to the number of high-paying tech jobs in the area and the attraction of working there for well-educated workers. 

Provo, Utah

Home of BYU (Brigham Young University), Provo has experienced population and rent growth over the last year but has seen its price growth drop due to the ongoing effects of high interest rates. The main employers in the city are education (BYU), tech, cosmetics, and healthcare. 

However, the home prices are the main drawback of investing in Provo. The median sold home price is currently $491.300 compared to the average rent, which is $1,803. This makes it a tough city to cash flow in the short term, though it is still a solid investment in the long term. 

Other College Town Stats

Looking at the other stats from our college markets growth potential table, one other town stands out—Oxford, Mississippi, home to the University of Mississippi. Home prices appreciated a massive 14.75% over the last year—even with high interest rates—while rental growth dropped 6.77%. 

How can that be? It appears it’s down to the aftereffects of the coronavirus, which still see towns and cities throughout Mississippi enjoying high appreciation numbers. 

According to realtor.com, though, there is a big difference between the median listing home price of $475,000 and the median sold home price of $306,400. The drop in rent prices could be due to tenants being unable to afford the jump in rents that occurred in 2022 (they currently stand at an average of $1,647), which accounted for inflation, low inventory, and higher prices. The modest drop is a correction after an unsustainable increase.

Final Thoughts

The South is enjoying its moment in the sun, and it doesn’t look like it will end anytime soon. The migration of jobs and people to Alabama, Texas, Florida, and South Carolina has created a perfect storm for real estate investing, with high-paying employment and low house prices. When interest rates eventually drop, cash flow will increase, fueling the demand for housing and likely pushing up home prices. Anchored by reputable colleges and a strong employment base, many of these cities make for great long-term investments.

Find an Investor-Friendly Agent

Match with an investor-friendly agent who can help you find, analyze, and close your next deal.

Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Source link

Publicly traded real estate technology company Doma Holdings has entered into a definitive agreement to sell to title insurance underwriter Title Resources Group (TRG) and become a private company.

Over the past year, the Max Simkoff-helmed firm has made its goal of becoming adjusted EBITDA profitable in 2023 widely known but failed to hit this mark. It reported an adjusted EBITDA loss of $3 million in the last quarter of 2023 and of $33.5 million for the entire year. 

In 2023, Doma sold off its retail operations in Florida, the Midwest, Central and Northern California, and Texas and made a major pivot in its business strategy. Its most recent endeavor is Upfront Title, launched during the third-quarter earnings call with investors and analysts. 

“This transaction is an important step in the growth and evolution of Doma, further strengthening us as we deploy our market-tested technology for large mortgage market participants,” Simkoff said in a prepared statement. 

The companies announced late Thursday that TRG has agreed to acquire Doma’s outstanding shares at $6.29 per share of common stock, paying it in cash. This represents a 43% premium compared to the share’s closing price on March 27.

If the transaction is approved, Doma’s underwriting division, title insurance, and technology division will operate as subsidiaries of TRG under the umbrella of renamed Doma Technology LLC (Doma TechCo).

In addition, “Doma TechCo would continue to have access to underwriting services and continued technology deployment for Doma Title Insurance, Inc.,” the companies added.

Asset management firm Hudson Structured Capital Management Ltd., which is currently invested in Doma, is expected to maintain its investment in Doma TechCo.

Doma’s board of directors unanimously approved the transaction, but it still requires the approval of stockholders and insurance regulators – a group representing 25% of the voting power has already signed an agreement supporting the transaction. 

The deal is also conditioned on the completion of certain transactions, an investment by Lennar into TRG, and other arrangements with HSCM. Also, per the agreement, Doma may solicit alternative acquisition proposals during a 50-day “go-shop” period.

The parties expect to close the transaction in the second half of 2024 when Doma will no longer be traded or listed on any public securities exchange.  

In June 2023, TRG announced that HomeServices of America, a Berkshire Hathaway affiliate and one of the nation’s largest residential real estate companies, has increased its ownership stake in the company.

Source link

Earlier this month, President Biden during his State of the Union announced several initiatives to address housing affordability in our country. We have long supported thoughtful efforts to ensure greater housing opportunity and affordability.

Unfortunately, one of the proposals the President mentioned in the SOTU was to revive a previously discredited and shelved pilot program that would waive the requirement for lender’s title insurance on certain refinances by Fannie Mae. Homeownership is out of reach for many Americans because of the lack of affordable homes, regulatory burdens to development, and high interest rates – not the cost of title insurance.

By removing the requirement for title insurance on these transactions, this program would introduce significant risk into the market and turn Fannie Mae into a primary market insurer, expanding authority beyond its mission and charter.

During a refinance, homeowners receive a new loan, and title insurance provides assurance that a lender’s investment is protected. Title insurance protects against many risks that may have occurred between an old and new loan, such as fraud or a lien from a debt that was not paid off.

The Biden administration compared title insurance to other lines of insurance that pay out 70% of premiums in claims. This is a mischaracterization of how our industry works that is either intentionally misleading or simply misinformed. The title insurance industry is proud of its low claims rate because of the upfront expenses and work by title professionals to ensure homeowners are protected. A lower claims rate means that title professionals have done a good job of resolving title issues uncovered during the title search process. In the case there is a claim, however, title insurance insures homeowners and lenders against threats to property rights.

In 2022, the industry paid more than $596.1 million in claims. This is up from $474.4 million in claims paid in 2021. Approximately one-third of all claims are for issues that would not be found in a public records search – demonstrating that title insurance could not be effectively replaced by an automated search of public records or alternative products that don’t go beyond a public records search.

Title professionals also play a key role in helping prevent fraud. Impersonation scams, elder real estate fraud and financial exploitation, and attempts to defraud spouses, partners or other property heirs are common schemes title insurance professionals prevent by halting fraudulent real estate transactions. Under Biden’s plan, title professionals would be removed from providing this key layer of fraud protection for consumers and lenders.

According to the proposal, lenders will pay Fannie Mae a fee to cover the risk if there is an unexpected title defect. Fannie Mae is a government sponsored entity created to provide liquidity in the secondary market focused on first-time homebuyers. By law it is not an insurer nor is it capitalized or regulated to do this. Title insurance is comprehensively regulated at the state level and having Fannie Mae act in this role is clearly outside of its core mission.

The last time Fannie Mae engaged in significant risk taking, it helped implode the housing finance system and cost taxpayers over $200 plus billion in taxpayer dollars in the 2008.

We can’t allow this pattern to repeat itself. Fannie Mae remains in conservatorship because of behavior like this. During the financial crisis, we unfortunately witnessed several systemic financial problems caused by shortcuts to well-established processes. Throughout that time, the title insurance industry indisputably proved its ability to reliably pay claims, many fraud-related, even in a severe recession.

If that crisis taught us anything, it is that underwriting standards and risk-protection should be strong and well-tested. Strong underwriting protects lenders and consumers alike — and title insurance provides a key part of this due diligence.

The administration is targeting an industry that protects property rights but there’s no conversation about further reducing fees charged by Fannie Mae — fees that are nearly six times more than the cost of title insurance over the life of a loan. And under this pilot, Fannie Mae will collect another fee, while hurting an industry with proven expertise that’s comprised of 90% small businesses and has a workforce that’s 70% women.

New research conducted by Ernst & Young’s Quantitative Economics and Statistics (QUEST) team found that in 2022, the title insurance and settlement services industry directly generated $30 billion to the U.S. GDP and employed 155,000 workers — and those are just the direct benefits. Hundreds of thousands of additional jobs and billions more in GDP are generated by suppliers to the industry and consumer spending that is an outgrowth of its important work. This report, released earlier this month by the American Land Title Association (ALTA), specifically measured the U.S. and local economic impact of the title insurance industry.

Importantly, the report found that the title industry collected $3 billion in back federal income taxes, property taxes, and unpaid child support, to the benefit of the communities across the county. These recovered funds provide critical support for local public programs and services — including education, infrastructure, and economic development. 

This data highlights the title insurance industry’s important role in fueling local economies across the country as both an employer and source of consumer protection. The job of a title insurance professional does not stop at protecting property rights – the industry has also taken significant steps to make homeownership more accessible. Preserving affordable housing is also important because it improves access to healthcare, transportation, jobs and vibrant communities.

Like any industry with a strong national and local footprint — the title insurance industry has operations that serve every county in the country — we believe it is our responsibility to play an active role and invest in the communities we serve. Whether it be through creating jobs or offering local grants to community nonprofits through our ALTA Good Deeds Foundation, the title industry is committed to strengthening communities across the country. We’ve seen this movie before with Fannie Mae expanding beyond its charter. We didn’t like the ending. Let’s make sure it doesn’t happen again.

Diane Tomb is CEO of the American Land Title Association.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

Source link

Reverse mortgage software and calculator provider Ibis Software announced this week that it appointed Robert Sivori, a reverse mortgage industry veteran, to its board of directors.

Sivori’s role became effective March 1, according to an announcement distributed to RMD by company president Jerry Wagner.

“Bringing a wealth of experience from the reverse mortgage industry, Sivori joins Ibis Software as a director, poised to contribute significantly to the company’s strategic growth initiatives,” the announcement stated.

Sivori has nearly 30 years of experience in the forward and reverse mortgage spaces. He previously served as co-founder and chief operating officer of Reverse Mortgage Investment Trust and Reverse Mortgage Funding (RMF). Prior to his role with RMF, he was a senior executive in the reverse mortgage division at MetLife Bank, co-founder and co-president of EverBank Reverse Mortgage, and president of BNY Mortgage Co.

Sivori also serves on the board of directors for the National Reverse Mortgage Lenders Association (NRMLA), most recently being elected to serve as vice chair on the association’s board in late 2023.

“Joining Ibis Software represents an exciting opportunity to leverage my industry insights and contribute to the company’s ongoing success,” Sivori said in a statement.

Ibis is currently focused on providing software solutions to U.S. Department of Housing and Urban Development (HUD)-approved Home Equity Conversion Mortgage (HECM) loan counselors. It also supplies NRMLA with its online reverse mortgage calculator. Ibis and Wagner provide regular mortgage rate updates for reverse mortgage industry professionals.

Source link

Last year might best be described as a risk-prone atmosphere for the single-family rental sector and the related fix-and-flip market.

The risky operating environment has been marked by volatile, high interest rates (with 30-year fixed rates now hovering around 7%), high financing costs and moderating rental rates as an influx of multifamily rental properties continues to come online across the country. 

Still, despite the gloomy news of late for SFR and fix-and-flip investors, some industry experts see better fortunes ahead in 2024 for both sectors.

“We didn’t call it a bear market, but we did call it a lack of liquidity, which I think is more accurate,” said L.D. Salmanson, CEO of Cherre, a data integration and insights platform serving the real estate market, including institutional owners of single-family rental (SFR) properties.

“That started in Q4 of 2022, so it’s been about six quarters at this point, and we predicted it would last 24 to 26 months,” Salmanson added. “So, there’s at least two [quarters] left, and I don’t see anything that will turn things around in the next couple of quarters where we’re going to see a massive number of (institutional SFR) transactions. It’s going to be a few more quarters before that happens.”

In addition, any reprieve in the housing inventory shortage created by more multifamily units hitting the market is expected to be short-lived. In recent congressional testimony, Mortgage Bankers Association (MBA) chief economist Mike Fratantoni pointed out that the housing market is now extremely supply challenged.

“While estimates of the needed supply vary widely, it is clear that we are millions of units behind at this point,” Fratantoni said in his statement submitted this month to a subcommittee of the U.S. House Financial Services Committee. “And even though we expect to see a large delivery of multifamily units over the next few years, this will not resolve the broader lack of inventory that we see across the country.”

The inventory shortage — in addition to high financing costs tied to elevated interest rates and related inflation for construction expenses — led to a nearly 30% decline in home flips in 2023, according to real estate data firm Attom.

The performance of the fix-and-flip market — in which investors purchase, rehabilitate and resell homes — can serve as a barometer for housing supply in general, given that the sector adds for-sale inventory to the market.

Last year, there was a total of 308,922 single-family home and condominiums flips, compared with 436,807 in 2022, according to Attom. Gross profits for home flippers also declined last year, to an average of $66,000 nationwide, down from $70,100 in 2022.

Attom points out that investment returns on these projects in 2023 were at levels that “could easily be wiped out by the carrying costs during the renovation and repair process, which usually consume 20 to 33 percent of the resale price.” 

“In 2023, the landscape for home flipping across the U.S. became increasingly challenging,” Attom CEO Rob Barber said in a statement, adding that “the sharp decline in the number of home flips likely reflected a combination of a tight supply of homes for sale as well as dwindling returns. 

“Either way, it will take some significant reworking of the financials for home flipping fortunes to turn back around.” 

Looming rebound

Despite the hardscrabble market realities facing SFR and fix-and-flip investors last year, 2024 could prove to be the year a rebound occurs — even if its full effect is not realized until later in the year.

For one, the Federal Reserve, despite holding its benchmark rate steady at its March meeting, is still signaling plans for three rate cuts this year. That should help to unlock more inventory while also reducing financing costs for leveraged investors. 

In addition, new-home construction — including in the hot build-to-rent (BTR) sector — is helping to slowly boost housing supply.

“While existing home inventory is quite constrained, with about 1 million homes for sale nationwide … builders have certainly picked up their pace of construction, and new homes now account for roughly one-third of homes on the market,” Fratantoni told the House committee. “This compares to a more typical 10% share of total home inventory historically.”

There is also an expected surge of housing demand that is likely to translate into healthy sales and rental activity in the years ahead. 

“The U.S population currently has about 50 million individuals between the ages of 30 and 40,” Fratantoni said. “This large millennial cohort is in the ages where household formation is at its peak, and we are seeing roughly 1.5 million households formed each year.”

Keith Lind, CEO of Acra Lending, a leading nonqualified mortgage lender, said early indications are that the year ahead looks promising for non-QM and related investment property lending for his institution. Non-QM loans typically serve clients who have nontraditional income sources, including the self-employed.

Lind points out that some 45% of Acra’s non-QM loans are to borrowers purchasing investment properties.

“Our pipeline of non-QM loans is up 30% from January and February of last year, versus January and February of this year,” he said. “We did $2.4 billion last year of (non-QM) originations, and we think we’ll do about $3 billion this year.”

Secondary market

A review of securitization deals tracked by Kroll Bond Rating Agency (KBRA) that are backed by non-QM loan pools and comprised of at least 30% investment properties (primarily single-family properties) shows that in roughly the first 10 weeks of 2023, there were 17 private-label offerings with a total value of $6.5 billion that closed. This year, during the same period, 20 such securitization deals with a total value of $7.3 billion hit the market.

Peter Van Gelderen is co-head of Global Securitized at TCW, a leading global asset management firm. He points out that investors in the secondary market are attracted to investment properties, particularly in an environment where rates are expected to soon start declining.

“Investors, like asset managers and insurance companies, like investment property loans because they are comfortable with the underwriting — the debt-service-coverage ratio, or DSCR, underwriting,” he said. “But investment property loans also aren’t subject to the same protections as [traditional residential mortgages], meaning they can have prepayment penalties.

“And so, if you have a view that the rates are coming down … you’re going to think people are going to refi more quickly, right? Then you’re going to say [as an investor], “Oh, how can I make some extra alpha, or money, and the way you do that is with the prepayment penalties.”

Geographic growth

A November 2023 report published by The Hamilton Project and focused on the SFR market notes that large institutional investors (those controlling at least 1,000 SFRs or more and have a presence in at least three markets) represent about 3% of the total SFR sector. But the bulk of mega-investor holdings (354,000 of the 446,000 SFRs) are concentrated in 20 markets, which are located primarily in the Southeast and Southwest regions, the report notes.

“For example, Atlanta is the largest single market, with almost 72,000 single-family rental units in the [metro area] held by institutional investors,” the report states. “For this market, institutional single-family investors hold 27.2% of all single-family rental properties and 9.53% of all rental properties (single-family plus multifamily).”

It’s worth noting that data analysis and size groupings in the fast-moving and wide-ranging SFR space vary across studies. They also depend on the timeliness of the data and the specific focus of the research. Cherre’s Salmanson, for example, estimates that the institutional-investor share of the SFR market could be as high as 6% to 7% nationwide. 

Fratantoni’s congressional testimony reveals that regardless of the percentage, SFRs are in great demand across the board. His congressional statement notes that some 40.4 million residents, or 39% of the 102.8 million renters nationwide, now live in SFRs. 

In terms of expanding their holdings via open-market home purchases, however, Salmanson said the large institutional players have been essentially “sidelined” in the current market.

He expects market dynamics to continue keeping these big players on the sidelines for at least the next two quarters — or at least until the interest rate, inventory and home price environment improves in their favor. In the meantime, these institutional SFR players have turned to a strategy of buying existing portfolios from smaller investors and doubling down on build-to-rent purchases.

Not enough supply

As an indicator of the slowdown in home purchases in the institutional SFR space, data from KBRA shows that in 2023, institutional operators issued four securitization offerings valued at $1.5 billion in total. In 2022, there were 15 such deals with an aggregate value of $10.3 billion.

“So, if I can’t buy in the open market, I either build or buy a portfolio,” Salmanson said. “Those are the two strategies employed in the last 18 to 24 months — rolling up the portfolios [of smaller SFR operators] and more build-for-rent.

“I don’t see any way [rent] goes down,” he added. “It’s not growing at the same pace, but there’s nothing that tells you [a decline] will happen when home prices are still high. The demand is increasing for these types of assets and we don’t have enough supply.”

Brandon Lwowski, senior director of research at HouseCanary — a proptech firm that provides institutional investors, lenders and other clients with residential real estate analysis — said there are currently about 73,800 SFRs available for rent at the national level. 

“That’s up 25.7% from last year (as of March 11), so it’s a big increase in inventory,” he added. “Yet the rental price is still staying up.”

“On the single-family rental side is where we’re kind of in this land of the unknown, where we’ve never seen this much inventory, historically, in single-family rentals,” Lwowski said. “So, that’s telling me that … there’s still enough demand to keep (rent) prices elevated even though we’re seeing inventory grow.”

Lwowski added that national rental rates for SFRs are up 2.7% from last year even as inventory has expanded. He pointed out, however, that within the SFR space (which includes BTR), it is the larger homes that are in greater demand and that are propelling rent growth in the space, given “we’ve actually seen price decreases” for the smaller SFRs that consist of one- and two-bedroom homes.

Kurt Carlton, co-founder and president of New Western, a large national private real estate investment marketplace that serves some 200,000-plus investors, said the institutional SFR players are now working closely with builders and “guaranteeing the purchase of a certain amount of their future pipeline” for the BTR market. In fact, Carlton suggests that many of these large SFR platforms now prefer to operate in the BTR space rather than purchase homes on the open market, where they compete with consumer buyers.

“What I think is going to happen when these institutions do come back is they’ll start to focus more on constructed, new-build inventory,” Carlton said. “It’s just easier for them to forecast and manage those properties.

“They’re evolving to a state where they can do that, and it won’t make as much sense to focus on infill [by purchasing homes on the open market and competing with individual homebuyers].”

The National Association of Home Builders (NAHB) estimates that about 8% of all single-family starts are now BTR construction. Salmanson estimates that the figure is closer to 16% because “a lot of the pipeline just isn’t captured yet by the data.”

Even if the BTR market slows down a bit as projected, it’s still expected to play an outsized role in the new-home market given the larger forces that affect the housing market at large.

“Demand by investors for single-family rental units, new and existing, has cooled in recent quarters as financial conditions have tightened,” NAHB reported. “Given affordability challenges in the for-sale market, the (single-family BFR) market will likely retain an elevated market share even as the sector cools in the quarters ahead.”

Optimism ahead

New Western’s Carlton points out that there also are some 15 million vacant existing homes in the U.S., with one-quarter of these built prior to 2008 and starting to “enter a phase where they need to be rehabbed for the first time.” He said this is a prime market for fix-and-flip investors given the shortage of for-sale inventory.

“For example, there were 50,000 new homes constructed by builders last year in Dallas-Fort Worth,” he said. “And there were 17,000 homes that were purchased and then resold as flips. 

“So, that’s about [one-third] of the new inventory that’s coming from homes that have been remodeled and returned to the market. … I see fix-and-flip investors as one way to help alleviate [the housing inventory issue] because they can at least bring what was off the housing market back to the market.”

John Burns Real Estate & Consulting conducted a recent survey of fix-and-flip investors and found that 49% of those polled expect to acquire more properties in 2024 than they did last year, despite the challenges they faced in 2023. 

Arvind Mohan is CEO of fix-and-flip lender Kiavi. Mohan said the John Burns survey is already hitting home for the lender, which he said posted “a notable uptick in fix-and-flip loans in our pipeline in the first six weeks of this year relative to the same period last year.”

“The biggest challenge for flippers in 2024 is acquiring new properties while housing stock/inventory is limited and there are few ‘good deals’ available that make sense from an investment perspective,” Mohan said. 

Still, despite the challenging market in 2023, last year was a banner year for Kiavi. The company funded a record $4 billion in fix-and-flip and bridge loans across some 13,000 loans to 5,800 individual investors, representing a 7% year-over-year increase in volume, according to a company announcement.

One sign of the proverbial sun starting to peek through the clouds that have hovered over the market since early 2022 — when the Federal Reserve began to raise benchmark rates — is the return of institutional capital to the private-label securitization market, which is facilitating greater liquidity in the primary market.

“The outlook for Kiavi’s RTL (residential transition loan, aka fix-and-flip] securitizations looks strong this year,” Mohan said. “Our recent deals (including a $350 million offering that closed in February) have been consistently oversubscribed, which is a good sign of investor demand.

“That gives lenders, myself and others more confidence that we can sustain our pipelines and service our customers well. What I would say is over the last, like, two to three months, we have reduced pricing to customers, just given the trends in the capital markets and so forth. We definitely see an uptick there.”

Although 2023 was a difficult year to navigate for large and small investors alike, as well as “solopreneurs” in the fix-and-flip space, there is reason to hold out hope for a brighter time ahead by reading the tea leaves.

“It’s just like there’s a lot more confidence in the directionality of where things are going, more than in how quickly they’ll get there,” Mohan said. “But the good thing is it’s moving in the right direction.”

Another change for the better in the SFR market that shouldn’t be underestimated, Carlton noted, is that recent advancements in technology are now being driven down to the smaller investors, making it easier to find, finance and manage properties — whether for sale or rent — in the SFR sector.

“A lot of the benefits that the institutions have, that they’ve built up over the years with technology, is starting to reach these independent real estate investors,” Carlton explained, “because when these institutions went on pause, a lot of these (tech) vendors had to find new customers, so they made that technology available to smaller investors.

“So, now it’s a lot easier for me, if I live in Seattle and I’ve got some money, I can invest in Ohio and buy some houses because now there’s better technology, there’s better ways of managing, there’s more of a network of property management across the U.S.”

“I think the real tailwind, however, is just that there is a fundamental, authentic demand for single-family homes simply because we just haven’t built enough homes,” he added.

Source link