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 down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
