What’s happening in the real estate market? Or the economy at large?
With talk of a recession looming somewhere on the horizon, investors are wondering where they should invest –or if we’ll see another housing crash any time soon.
As Senior Vice President of portfolio services, Noel’s been in this space for a long time. Today, he’s here to talk about the latest single-family rental investing news, insights, and tips. In this podcast, he brings his experience and professional expertise to the table, helping to bring some clarity to the space.
It’s safe to say that when it comes to the news today, there’s a lot of hype. And a lot of different narratives as different publications spin the stories to make a point.
Take, for example, unemployment numbers. They came back strong again today, with 136,000 jobs created this month –spelling out the lowest levels of unemployment since 1969.
There’s a narrative, though, that’s being perpetuated by some experts that we’re underperforming. But when you peel back the layers, you can see that that’s because people are looking at the numbers that the experts were predicting things to be. So say the experts were projecting 156,000 jobs and there’s actually been a growth of 136,000 jobs, they’re going to say we’re falling short. When the reality is, jobs have increased.
Note: Want to see what’s going on in the financial world? Noel recommends Wolf Street.
There’s also been a lot of talk lately around the recent IPO crashes. Companies like Uber, Slack, Crowdstrike, Pinterest, Chewy, and Zoom –are performing 20%, 40%, 50% below their IPO prices, This means a lot of layoffs, and some softening in the job market. Softbank and Chinese Market are pulling back in Silicon Valley. So Silicon Valley housing has seized up and Chinese investors are gone. So that means that the market has largely returned to normal –the only ones buying homes are people that actually need a home. The fear, though, is that it will spread to the entire state of California could it affect the overall housing market. It’s only speculation though, we don’t know what will happen.
It’s crazy though, that we’re talking about a return to normal market conditions in a place like San Francisco as a bad thing.
What’s Happening With High-End Markets?
High-end luxury markets are softening –in places like Chicago, New York, Seattle, Southern California.
Take Miami –for instance, they’re building homes while there are still units that aren’t even halfway sold, and now, hard money lenders are pulling back.
Overall, the numbers are staying strong in the housing market, though. The reason largely has to do with supply.
What’s happening in the stock market, what’s happening in the tech world with recent layoffs –these events all affect the second-home market. The $2 million-plus market’s starting to soften as well; however, the bulk, the meat of the housing market is still strong.
So what does this mean for investors?
Opportunity!
There are a number of factors converging to create opportunities in the SFR investing space, as it’s increasingly opening up to everyday investors.
Noel says that he hasn’t seen this kind of enthusiasm in the SFR rental space since 2012 to 2015, when the bottom of the market hit; and institutional investors were buying up properties –and the SFR home market started to become institutionalized.
Fast forward ten years –to where we are now, what we call the “second decade” –the service companies, like Renters Warehouse, that are coming up to the market to create the level of services that re needed to professionally own SFR rentals –even for small to mid-size investors.
Small investors have never had a better opportunity to look at the top-100 markets across the country, or –as is the case with Renters Warehouse, the top-41 markets.
You can now invest outside your geographic region, you can have confidence that you’re buying a good investment, and have confidence that there’s going to be good property management.
We’re putting these investments into the hands of everyday investors.
You could look at the numbers for all of these high-end markets, and say, “Hey we’re having a real estate crash,” but that’s not necessarily the case. Some of this could affect regional markets, but overall the numbers are staying strong in the housing market.
There are a number of reasons for this. One of the main ones is a lack of supply. There are also affordability issues. A lot of people can’t buy a house, but they are trying to move to places where they can afford to buy.
CoreLogic’s recent report projects appreciation in the next year to be about 5.8% year-over-year. Last year, appreciation was about at around 3.6%. These are strong numbers. When you look back over the history of housing appreciation, it’s always been at around 3%, 3.5%, or 3.6% –but they’re talking about it going up even more.
Secondary markets are on the rise. Check out the rate of appreciation in the following states:
- Idaho 11.6%
- Utah 8%
- New Mexico 7.3%
- Maine 6.9%
- Indiana 6.5%
- Arizona 6.2%
- Missouri 5.5%
- Wisconsin 5.5%
- New Hampshire 5.2%
- Tennessee 5.2%
While there are still some opportunities to be had in major cities like Dallas and Chicago, but if you’re trying to be on the bleeding edge of the best places to invest, start looking at secondary markets.
When trying to evaluate a potential market to invest in, don’t just go off of a news article that may be trying to spin things a certain way, instead go to a solid source.
CoreLogic is a great resource, and a good place to go for information. Go to their website, click on insights, and take a look at their reports. Another thing to look at on their site is the market condition indicators. That’s a great way to see what’s happening. Look at the top-100 markets.
As of August, 23% of the top-100 markets were undervalued, 40% were at value, and 37% were overvalued.
There’s a lot of opportunities to buy, especially in markets that are undervalued. Places in Oklahoma, or the rust belt –and some of the southeast markets. Note that these markets aren’t suburban markets in the middle of nowhere with not a lot going.
Another resource that Noel recommends is the BAN Report by Clark Street Capital. You can read the reports and the actual data that’s being referenced.
One of the reports that’s mentioned by the BAN Report, is a report that’s done by Price Waterhouse Coopers and the Urban Land Institute. This report is talking about the live, work, and play districts –the growth of 24-hour cities –and the fact that people increasingly want to live in an area that they can experience. And –as a bonus, these areas are generally more affordable too. The report goes on to talk about Hipsturbia, which refers to the cool suburbs that are associated with the metro areas, with vibrant downtowns. Places people want to live.
So when you’re thinking about where to invest –think of where people are moving to today. People are moving to these areas, and there’s demand for SFR housing.
Just remember to think, not so much about the main cities –but the secondary markets as well. The rise of remote workers is also changing how people work, where they live, it’s all shifting –and you’ll want to keep up with where people want to live. Throw out the past –where people used to live –clustered in isolated suburbs, and think about now –where are people trying to buy, and trying to rent. You’ll want to go there.
Reach out if you want to get in touch with any ideas for future episodes!
Be sure to check out Renters Warehouse’s helpful videos and blog content to learn more about SFR investing –or take a look at our marketplace to see investment properties for sale.
At Renters Warehouse, we’re working to help the SFR space develop, and are here to help investors at every step of the way. If you’d like help with your investment strategy, or creating a real estate investment plan –visit Renters Warehouse. And if you have any questions please drop us a line and one of our Rent Estate™ advisors will get back to you.
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