A new report from New Western, a national real estate investment marketplace, indicates that local real estate investors are poised to outperform traditional builders in several key markets. The report, based on a survey of 1,300 independent investors and analysis of market data, reveals significant trends and investor sentiment in the single-family real estate sector.
Surge in Home Flips
In 2023, New Western operated across 42 markets, where there were 185,272 new builds compared to 163,894 home flips. The report notes that vacant or uninhabitable homes that have been flipped contribute new inventory comparable to new construction. Investors are selling these flipped homes at an average of 21% below the market sales price, making them an attractive option for buyers.
Market Dynamics and Investor Sentiment
The survey shows a bullish outlook among investors, with 91% expecting their businesses to grow despite challenging market conditions. Furthermore, 80% of respondents plan to flip between one and five homes throughout 2024. Female investors, in particular, show strong optimism, with 19% anticipating 50% growth compared to 13% of male investors
Local Market Highlights
Boston, Indianapolis, and Denver are notable examples where home flips are outpacing new builds. In Boston, 4,347 flipped homes were sold in 2023 versus 3,166 new homes. Boston investors sold flips at 7.8% below the median sales price, contributing significantly to the local housing inventory. Similarly, Indianapolis saw 4,700 flipped homes sold compared to 4,074 new builds, with flip prices 6% below the median sales price. Denver reported 4,759 home flips sold against 4,296 new builds, with flip prices 2.2% below the median sales price.
The Great Renovation
Kurt Carlton, president and co-founder of New Western, emphasized the impact of local investors on the housing market. “We’re helping Americans achieve financial freedom and address the housing and affordability crisis,” Carlton said. He highlighted the role of small businesses in renovating and flipping homes, addressing a shortfall of 4.5 million homes and leveraging millions of vacant, aging properties ready for renovation.
Investor Demographics and Strategies
The report also highlights differences in investment strategies between male and female investors. While a majority of female investors have been in business for less than three years, compared to their male counterparts who have been investing for over three years, they achieve higher sales prices and quicker sales. Male investors typically allocate between $50,000 and $200,000 for rehab budgets, while female investors often spend less but demonstrate significant market savvy.
Conclusion
Titled “The Flip Side: Residential Real Estate Investing Trends Mid-Year 2024,” the report offers a comprehensive analysis based on opinion polling from April to May 2024, combined with New Western’s transaction data from 2023 and 2024. Additional data on new construction was sourced from Zillow, and vacant home data was provided by the U.S. Census.
As local real estate investors continue to meet community needs and contribute to housing affordability, their role in the market appears increasingly vital, challenging the dominance of traditional builders.
Market sentiment from additional experts:
- “The last leg in the inflation fight is to reduce shelter inflation, and this can only occur if builders are able to construct more attainable, affordable housing. Local investors are also a part of the housing ecosystem to work towards finding an equilibrium between supply and demand. As we enter the second half of 2024, higher costs and rates remain obstacles,” said Robert Dietz, Chief Economist and SVP for Economics and Housing Policy for the NAHB.
- “As a female real estate investor, I put myself in the mind of the female buyer, often the decision maker, and renovate homes to suit her lifestyle. Women bring a unique perspective to real estate investing, often focusing on creating value through attention to detail and fostering strong relationships with buyers and contractors,” said N’Marie C., Phoenix Investor
