the horizon. All of these factors may seem to paint a rather bleak picture for real estate investors, but that’s not necessarily the case. Investors who are cash buyers suddenly find themselves in a position of extreme competitive advantage, as buyers who need a loan have seen their finance costs effectively double in the past few months. As days on market increases for homes once they’re listed, sellers may find a quick close by a cash buyer too attractive to pass up. Even investors who work with private lenders are at an advantage because they tend to finance for shorter periods of time than traditional consumer homebuyers and can usually build their increased short-term financing costs into their sales prices. The fix-and-flip market continues to be robust. ATTOM’s Q1 Fix-and- Flip Report showed that almost 10% of all residential home sales were flips, the highest percentage in more than a decade. Flippers will need to be more careful with their purchase price and repair costs due to price appreciation slowing down, but buyers are still looking for move-in ready, reasonably priced homes across the country, especially in the South and West. The rental market should continue to be especially strong for the next few years, as the cohort of young adults between the ages of 26-33, the largest such group in U.S. history, reaches its prime years for household formation in a market where homeownership has become increasingly unaffordable. Many would-be homebuyers have opted to rent while they wait for home prices to settle down or, in some cases, while they decide where they want to settle down in the new work-from- home world. Opportunities abound
in both the apartment market and the single-family rental market especially, because many of these young adults have started families. Finally, don’t overlook opportunities in the foreclosure market, where the number of foreclosure actions in the first half of 2022 increased by 153% compared to last year’s artificially low levels. Although there almost certainly won’t be another foreclosure tsunami, the market should get close to its normal levels by sometime in mid-2023 (possibly sooner if there’s a severe recession). Foreclosure investors need to rethink their approach in today’s market, however. Prior cycles saw the majority of homes in foreclosure repossessed by the lender and brought back to market as REO properties. This cycle is likely to see financially distressed homeowners sell their homes in the early stages of foreclosure in order to protect their equity. Properties that make it to the foreclosure auction are selling at record rates—60%-70% of homes brought to sale are sold at these auctions—leaving little to go back to the lenders. So, successful investors
Rick Sharga is the executive vice president of market intelligence for ATTOM, a market-leading provider of real estate and property data, including tax, mortgage, deed, foreclosure, natural hazard, environmental risk, and neighborhood data. One of the country’s most frequently quoted sources on real estate, mortgage, and foreclosure trends, Sharga has appeared on CNBC, CBS News, NBC News, CNN, ABC News, FOX, Bloomberg, and NPR. Sharga is a founding member of the Five Star National Mortgage Servicing Association, serves on the board of directors of the National Association of Default Professionals, and was twice named to the Inman News Inman 100, an annual list of the most influential real estate leaders. Sharga has more than 20 years’ experience in the real estate and mortgage industries, including roles as the executive vice president at RealtyTrac, as an executive vice president for Carrington Mortgage Holdings, as chief marketing officer of the company’s Vylla business unit, and as the chief marketing officer of Ten-X and Auction.com, the leading online real estate marketplace. will target foreclosure properties upstream, and not wait for lenders to repossess and resell these homes. Real estate investing will be more challenging through the rest of 2022 and into 2023 than it’s been the past few years, but for investors who take the time to do their homework and make the effort to fill areas of real need, there are still ample opportunities for success. •
74 | think realty magazine :: september - october 2022
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