Josh Altman spoke to FOX Business about the luxury real estate market and the impact of the new “mansion tax” in Los Angeles.
The rising cost of living and long-term price increases of residential properties in U.S. coastal markets is pushing out-of-state real estate investors into America’s southern and Rust Belt cities.
Metropolitan areas including San Antonio, Tampa, Indianapolis, Jacksonville and Charlotte, North Carolina, are emerging as target destinations for long-distance investors.
In an interview with FOX Business, Dameion Kennedy, a real estate analyst with Lima One Capital, said “local regulations for landlords in these cities, the property taxes, labor availability, population growth and local knowledge for specific investors to find properties has pushed these locales to the top of the list.”
“These cities are cheaper than West Coast markets because of long-term prices and cost of living.” he added. “However, the best investors know success depends on the individual property much more than geographic area. But there are strong trends indicating these markets have individual properties worth the investment.”
A house’s “for sale” sign shows the home is “under contract” in Washington, D.C. (Saul Loeb/AFP via Getty Images / Getty Images)
“And long-distance investing is more than building,” Kennedy added. “It could be home flipping, or it could be buying existing homes to use as rentals.”
Data compiled by Lima One Capital shows real estate investors are benefiting from above-average occupancy and rental rates under current market conditions, which play a key part in supercharging cash flow for portfolios.
The data also showed higher interest rates are pricing out would-be homebuyers, pushing them toward single-family rental homes.
Data compiled by Lime One Capital shows rents averaged $1,716 nationwide as of Jan. 1, up 6.4% year over year. (iStock / iStock)
At the same time, elevated interest rates have made it harder to scale portfolios for investors purchasing more properties due to difficulties making the debt-service calculations (DSCR) pencil out on new purchases.
Institutional investment in sector growing, but for how long?
In 2022, MetLife Investment Management estimated that institutions owned some 700,000 single-family rentals across the U.S., making up about 5% of the 14 million single-family rental homes.
By 2030, MetLife forecasts institutions will increase single-family rental holdings to 7.6 million homes, accounting for over 40% of the market.
Kennedy said institutional investors are jumping into “hot” cities to construct multifamily properties and build-to-rent developments that include hundreds of houses for rent rather than sale.
A suburban housing development viewed from above in Texas (iStock / iStock)
“Institutional investors usually focus on the top 25 to 50 metropolitan statistical areas in the country,” he added. “And both multifamily and single-family rental properties are popular choices for institutional investors.”
According to the Lima One data, the top five U.S. states for institutional investment are
Arizona (14.3%)
Georgia (12.7%)
Tennessee (10.7%)
Nevada (10.6%)
North Carolina (10.2%).
The top cities with the greatest share of institutional investors selling properties are
Memphis (19.7%)
Jacksonville, Florida (18.3%)
Macon, Georgia (17.6%)
Atlanta (16.8%)
Clarksville, Tennessee (16.7%)
We could see weaker household formation and demand in 2023. Meanwhile, transaction activity will be affected by value uncertainties. (AP Photo/Eric Risberg / AP Images)
“Institutional investors have jumped into the rental market with both feet in recent years, impacting both home prices and rental rates,” Kennedy said.
Marcus and Millichap CEO Hessam Nadji discusses volatility in the current housing market, apartment rent rates falling and the expected Case-Shiller 20-city index data.
“While these investment firms get a lot of publicity, they only make up about 3 to 5% of the total single-family rental market,” Kennedy added. “The overall economic uncertainty of 2022 slowed the rate of institutional investors making purchases, calling into question how much of the market they will gobble up in the coming years.”
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
