The glory days of real estate investors buying and flipping homes for quick profits seem to have hit a roadblock. It appears that investors are now losing on approximately one out of every seven homes they sell.
In certain U.S. cities, sky-high house prices and elevated mortgage rates have diminished homebuyer demand, forcing investors to sell homes at a loss. A recent report by Redfin reveals that in March, investors lost money on roughly 13.5% of the homes they sold, while only 4.8% of overall U.S. homes sold at a loss.
February Real Estate Numbers
This comes after a dire month in February, where real estate investors experienced losses on 14.5% of homes sold — the highest rate since 2016 and a far cry from the record monthly low of 2.8% in May 2022. The first quarter of 2023 saw real estate investors purchasing 48.6% fewer homes compared to the previous year as elevated interest rates, declining rents and housing values ate into potential profits.
The decline marks the largest annual drop on record, outpacing the 40.7% decrease in overall home purchases in the major metros Redfin tracks. While these statistics dispel the notion that buying and selling real estate guarantees substantial profits, it’s worth noting that investors still enjoy a relatively strong position overall.
Now, the question arises: Where are homes most likely to sell at a loss? According to Redfin, real estate investors are most likely to incur losses in markets that experienced the largest surges in house prices during the pandemic. To determine this, the report examined data from 40 of the most populous U.S. metropolitan areas.
Profitability has been hampered by high mortgage rates, which have increased the monthly payment burden for typical homebuyers. Consequently, the slowdown in homebuying demand has led to reduced sale prices, resulting in a higher share of investor-owned homes being sold at a loss.
Hardest Hit Markets
At the time of the report, the hardest-hit market was Phoenix, where just over 30% of homes sold by investors incurred losses. Following closely were Las Vegas, 28%; Jacksonville, Florida, 20.9%; Sacramento, California, 20.2%; and Charlotte, North Carolina, 17.4%.
Van Welborn, a Redfin agent in Phoenix, shared an example. “I recently showed one of my buyers a three-bedroom, single-family home in Glendale that was listed by an investor. My client ultimately found another house they liked better, and the investor ended up losing about $20,000. The investor bought the home for $450,000 and sold it for $480,000 but put $50,000 of work into it. The house also sold below the $550,000 list price after sitting on the market for almost four months.”
On the flip side, investors are less likely to face losses in affordable areas where housing prices did not experience such drastic increases during the pandemic. Certain South Florida markets have shown more resilience.
For instance, in March, only 1.7% of homes sold by investors in Virginia Beach, Virginia, resulted in losses — a significant difference compared to Phoenix. Following Virginia Beach were West Palm Beach, Florida, 2.4%; Miami, 2.5%; Fort Lauderdale, Florida, 2.5%; and Warren, Michigan, 2.6%.
Why don’t investors wait to sell until the housing market bounces back? According to Redfin Senior Economist Sheharyar Bokhari, many long-term investors who rent out their properties are doing just that. But for many flippers, especially those who made recent purchases, waiting it out is not financially feasible.
In March, approximately 1 in 5 homes sold by home flippers resulted in losses, according to Redfin.
“Holding onto homes that aren’t producing income can be expensive because the owner is on the hook for property taxes, along with operating costs and monthly mortgage payments in some cases,” Bokhari said. “Many short-term investors are also opting to sell because they know prices may have more room to fall and want to cut their losses.”
While the number of investor-owned homes selling at a loss is currently high, it is important to remember that many real estate investors — both large companies and individual investors — continue to achieve gains from buying and selling homes, even in cooling housing markets.
According to Redfin data, the typical investor sold a home in March for 45.9% ($145,714) more than the purchase price. But these gains have diminished from 55.3% ($173,458) the previous year and a peak of 67.9% ($199,274) in June 2022.
Amid concerns of a further slowdown in the economy and home prices, which could present more challenges for residential real estate investors, alternative avenues to participate in the real estate market are worth exploring. If buying and selling homes is currently off the table, consider alternative approaches.
Vacation Rentals
Some real estate experts believe that vacation rentals offer the fastest way to make money in today’s real estate market. In 2023, as Americans opt for longer and more luxurious vacations, investing in vacation rentals makes sense when considering all the factors. And the best part? Anyone can get started with just $100.
Jurny, the first artificial intelligence (AI)-enabled hospitality platform, is revolutionizing the short-term rental industry. It reported a staggering 100% increase in daily active users since the launch of JurnyOS 2.0 last month. This cutting-edge operating system, powered by GPT-4 and featuring dynamic AI tools, takes care of all the heavy lifting for property managers. From streamlining operations to enhancing guest experiences, Jurny’s all-in-one solution optimizes and automates every aspect of managing short-term rental properties worldwide. Anyone can invest in Jurny for a limited time.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
