Resources for Real Estate Investors

The Pandemic Housing Boom’s ultra-low interest rates and adoption of work-from-home policies boosted home value growth in essentially every U.S. housing market. However, in the current housing market—marked by strained housing affordability—it’s a mixed bag across the country. While national home prices are still inching up slightly on a year-over-year basis, some regional markets are experiencing greater growth, while some others are seeing outright declines in year-over-year home values. To get a sense of how home prices have shifted in the past year across the country, LendingOne analyzed Zillow Home Value Index data to evaluate year-over-year home price growth. Here are LendingOne’s top-line findings: U.S. home prices are up +3.2% year-over-year, with the strongest growth in California, Midwest, and Northeast markets. From June 2023 to June 2024, home prices softened in many metropolitan areas across Texas, Florida, Louisiana, and Alabama—with some seeing outright price declines. Fueled by the ongoing AI boom, San Jose saw home prices grow 12% year-over-year, the highest among the 50 largest U.S. housing markets. Among the 50 largest U.S. metropolitan areas:: The metros with the highest year-over-year home price growth were: San Jose, CA: +12% Hartford, CT: +10.5% San Diego, CA: +9.4% Providence, RI: +7.7% Los Angeles, CA: +7.6% The metros with the lowest year-over-year home price growth were:   New Orleans, LA: -6.0%  Austin, TX: -4.7%  San Antonio, TX: -2.7%  Dallas, TX: +0.4%  Minneapolis, MN: +0.4% It’s worth noting that while Austin and San Antonio are down year-over-year, home prices in those metropolitan areas are still up significantly since before the Pandemic Housing Boom.  Home prices in the metro areas of Austin and San Antonio in June 2024 were still 46% and 38%, respectively, above June 2019 levels, according to LendingOne’s analysis Declines could be on the horizon for more Gulf markets like Tampa and Jacksonville. These metros saw very little appreciation this spring and experienced high inventory growth. Now that we’re in a seasonally weaker time of the year, price growth in these areas could turn negative for a period of time. Or what some investors might consider buying opportunities. Meanwhile, many Midwest, Northeast, and California metros—where resale inventory remains tight—are still seeing above-normal appreciation. Big Picture: After several years of rapid home price appreciation during the Pandemic Housing Boom, the U.S. has seen modest home price growth over the past year. However, the picture varies significantly across the nation. Stay informed with our latest news and advice by visiting our blog. And when you’re ready to take the next step, learn how our loan products can help you achieve your investment goals.

LendingOne analyzed Redfin’s most recent quarterly data for investor purchases to better understand what investors are doing in the housing market right now. LendingOne Topline Findings:  In Q1 2024, the total number of U.S. homes purchased by investors was 47.3% below the levels reached at the height of the Pandemic Housing Boom in Q1 2022. In Q1 2024, the total number of U.S. homes purchased by investors was 0.5% above what investors purchased in Q1 2023. In 2021, investors took advantage of the Pandemic Housing Boom’s favorable buying conditions. Historically low interest rates, stimulus policies, and the shift to remote work boosted investor purchases of homes across the U.S. In metros like Sacramento, Jacksonville, and Atlanta, investor home purchases more than doubled from pre-pandemic levels.  However, this frenzy fizzled out once the average 30-year fixed mortgage rate jumped above 6.0% in summer 2022. The higher rates meant that far fewer homes for sale could generate the returns that everyone from small landlords to larger institutions were seeking. This led to a significant slowdown in investor purchasing activity. Nationally, investor home purchases fell from 83,468 at the peak in Q1 2022 to 43,969 in Q1 2024—a 47% drop.  While total investor purchases are still well below levels seen during the frenzy, the deceleration has let up. Indeed, investors’ purchases in Q1 2024 (43,969) were just a hair higher than the number of U.S. homes investors purchased in Q1 2023 (43,753). And some West Coast markets, where investors had pulled back sharply following the rate shock, have started to see some investors return to the market.     Investor trends vary a lot by market. Among the 40 major metros that Redfin tracks, 18 saw a drop in investor home purchases from Q1 2023 to Q1 2024, while 22 saw a jump.  These five metros saw the most investor home purchase growth year-over-year:   San Jose (+28.0%) Oakland (+22.1%) Minneapolis (+21.7%) Sacramento (+20.2%) San Francisco (+18.6%) These five metros saw the least investor home purchase growth year-over-year:  Cincinnati (-22.1%),  Baltimore (-22.0%)  Providence (-20.2%),  Virginia Beach (-15.1%) Chicago (-14.6%)  While California markets have seen year-over-year growth in investor purchases in the past year, they are still among the markets with the least total investor activity. The reason is that it’s still hard to find cash flow in high-cost markets on the West Coast. Big picture: Recent data from Redfin reveals that investor activity in the housing market remains subdued due to high interest rates and elevated home prices relative to rents. This could change if mortgage rates fall or prices soften.   Stay informed with our latest news and advice by visiting our blog. And when you’re ready to take the next step, learn how our loan products can help you achieve your investment goals.

The Federal Reserve has a dual mandate from Congress: to maintain “maximum employment” and “stable prices.” Since spring 2022, Fed Chair Jerome Powell has focused on inflation. However, with inflation nearing the 2% target and the unemployment rate slightly rising, starting this month—when the Fed is expected to make its first rate cut—the central bank’s focus will likely shift toward employment. While the Federal Reserve doesn’t directly set long-term rates, including mortgage rates, these rates often move in response to anticipated future economic and monetary conditions. In fact, amid recent cooling labor market data and the increased likelihood of Fed rate cuts, mortgage rates have come down slightly in recent months. Last week, the average 30-year fixed mortgage rate tracked by Freddie Mac came in at 6.35%, well below the 7.22% peak reached in May of this year. To find out where mortgage rates and the housing market could go from here, LendingOne analyzed the latest housing market data and rate forecasts. LendingOne Top Findings: Most forecasters expect mortgage rates to fall further over the coming year—but not a huge drop. Despite the recent drop in mortgage rates, turnover in the resale market still remains low.  Refi activity is finally starting to pick up. Future Rate Projections:   Looking ahead, most forecasters expect mortgage rates to gradually come down a bit; however, without a recession, the decrease might not be as significant as some investors would like.  The Mortgage Bankers Association expects 5.9% by Q4 2025.  Fannie Mae also expects 5.9% by Q4 2025.  Wells Fargo expects 5.8% by Q4 2025. If the labor market begins to weaken faster than expected, or the jobless rate spikes, short-term and long-term interest rates could fall faster than expected. While if the labor market tightens up, or inflation picks back up, we could get fewer cuts than currently expected. Will Lower Rates Lead to More Home Sales?   The recent dip in mortgage rates and slightly improved housing affordability have yet to make a noticeable impact on sales activity.  In fact, the Mortgage Purchase Application Index, a proxy for future existing home sales, is still hovering near multi-decade lows.  The first thing to keep in mind is that this mortgage rate dip is occurring during the seasonally soft window. If the mortgage rate dip holds and the job market remains strong, it could lead to more activity in spring 2025.  Another important point is that even with this mortgage rate drop, the “lock-in effect” is still in play, which will slow the bounce back for existing home sales. Many homeowners who would like to sell and buy something else are staying put, rather than facing a higher mortgage rate and monthly payment. Refinancing Gains Momentum   One area that has seen some improvement from the recent mortgage rate dip: Refi. Refinancing has gained momentum as borrowers who secured rates above 7.0% in the past 24 months take advantage of the recent dip for some relief. While this isn’t a refi boom—at least not yet—it does represent an improvement from the multi-decade lows reached during the mortgage rate shock. To really jumpstart the refinancing market and the second mortgage market, the average 30-year fixed mortgage rate would likely need to approach 5.5%. Final Thoughts While we’ve seen a slight dip in mortgage rates over the past year, with forecasters expecting this trend to continue into 2025, investors should remember that predicting interest rates has been especially challenging in recent years. This is due to the lingering effects of the pandemic, lockdowns, record-low rates, massive stimulus, inflation shocks, and the fastest rate-hiking cycle in decades. Stay informed with our latest news and advice by visiting our blog. And when you’re ready to take the next step, learn how our loan products can help you achieve your investment goals.

This week, LendingOne analysts parsed through state-level homeowners insurance data to determine what single-family investors are seeing across the country. LendingOne’s top-line findings: U.S. homeowners insurance effective rates increased 11.3% in 2023—up from a 6.2% increase in 2022. That’s eating into some investors’ rental cash flow.  Last year, homeowners insurance rates increased the most in Southwestern markets. The cost of homeowners insurance has increased the most in Texas since 2018, with a cumulative increase of 60% over the past five years.  The five states with the biggest homeowners insurance effective rate increases in 2023, according to LendingOne’s analysis of data from S&P Global Market Intelligence:  Texas: +23.3%  Arizona: +21.8%  Utah: +20.3%  Illinois: +18.5%  Oregon: +16.5%   It isn’t just a result of climate-related risks. The U.S. has seen particularly high home insurance effective rate jumps in the past couple of years, echoing the spikes in home prices during the Pandemic Housing Boom. Simply put, rising repair and renovation costs have put upward pressure on insurance premiums.   Between 2018 and 2021, only one state (Florida in 2020) experienced a one-year effective rate increase of more than 10.0%. In 2022, six states saw double-digit effective rate increases. In 2023, 25 states saw homeowners insurance rate increases of 10.0% or higher. Big Picture: Single-family landlords are seeing their homeowners insurance premiums rise quickly—and not just in coastal states more prone to natural disasters.

In this issue, you’ll see the full results of the LendingOne-ResiClub Single-Family Rental Investor Survey. Real estate investors who own at least one single-family investment property were eligible to respond to the LendingOne-ResiClub SFR Investor Survey, fielded between June 25 and July 18. ResiClub, our partner for the survey, is a news and research outlet dedicated to covering the U.S. housing market.   Our Topline Findings for the SFR Housing Market: 60% of single-family landlords say they’ll likely buy at least one investment property over the next 12 months.  39% of single-family landlords say they’ll likely sell at least one investment property over the next 12 months.  76% of single-family landlords expect to raise their rents over the next 12 months—including 35% who say the increase will be over 4.0%.  2% of single-family landlords expect to decrease their rents over the next 12 months. 72% of single-family landlords expect home prices to increase in their core housing market over the next 12 months. But only 31% expect an increase of over 4.0%.  86% of single-family landlords expect interest rates to fall over the next 12 months. However, just 10% of those landlords expect a decline of more than 1 percentage point. 50% of single-family landlords say home insurance was their expense that increased the most over the past 12 months   Big picture: The survey reveals that a significant majority of single-family landlords are cautiously optimistic about the SFR housing market over the next 12 months, with many planning to buy properties, raise rents, and anticipate rising home prices and falling interest rates. However, they only expect a mild increase in rents and home prices and a mild drop in interest rates while also reporting that home insurance costs are an area of concern. “The survey result generally aligns with what we have heard from clients and from data over the last 12 months,” says LendingOne CEO Matthew Neisser. “We saw apartment rents starting to stall months ago; apartment rents were already leveling out in most markets and becoming more competitive with concessions. So, on the single-family side, apartments can be a benchmark as a competing product.” “Generally affordability is coming into play on both apartments and the SFR space,” he continues. “It seemed logical there’s only so much rent growth in some of the markets. That being said, clients are becoming more active as inventory starts to rise and rates have improved.” Below, you can find the full results broken down by regional SFR housing market:   How Likely Single-Family Rental Investors Are to Buy Another Investment Property in the Next 12 Months   How Likely Single-Family Rental Investors Are to Sell Any of Their Investment Properties in the Next 12 Months    How Much Single-Family Rental Investors Plan to Raise Rents Over the Next 12 Months   How Single-Family Rental Investors Expect Home Prices to Shift in Their Core Housing Market over the Next 12 Months   What Single-Family Rental Investors Expect to Happen to Interest Rates in the Next 12 Months   “Inventory reached unprecedented lows during and after the COVID-19 pandemic, making it challenging for investors to acquire properties and expand their portfolios due to fierce buyer competition,” Neisser continued. “However, as the market stabilizes, we anticipate increased buying opportunities for our clients. It’s important to note that while significant rent appreciation is less likely in the current climate, investors should still base their purchasing decisions on realistic expectations.” Neisser added that if investors are right, and interest rates come down a bit, even better. “All else being equal, rates coming down is great for our investors, period”   This quarter’s survey uncovered interesting insights about how real estate investors are weathering the current economic dynamics. Stay informed with our latest news and advice by visiting our blog. And when you’re ready to take the next step, learn how our loan products can help you achieve your investment goals.

Analysts at LendingOne looked over the latest inventory data to better understand what could await real estate investors over the coming year. LendingOne’s top-line findings:  The number of homes for sale is rising in most of the country on a year-over-year basis. Investors out shopping are seeing more leverage, in most markets, now than two years ago. Inventory for sale on a national level is still limited, which explains why spiked mortgage rates haven’t created more price declines thus far.  Active listings remain tightest across markets in the Northeast and Midwest, while there’s greater softening happening in parts of the Southwest, including many Texas markets, and the Southeast, including many Florida markets. In June 2024, there were 839,992 national active listings on Realtor.com, showing a 46% increase from June 2022 levels (573,650 listings) and a 37% increase from June 2023 (614,326 listings).     The 5 states that have seen the biggest increase in active inventory for sale over the past 12 months: Florida: +71%  Vermont: +62%  Arizona: +54%  Georgia: +53%  Hawaii: +50%   However, national active listings in June 2024 (839,992 listings) were still -31% lower than the pre-pandemic levels of June 2019 (1,219,807 listings). That lack of active listings is a core reason that strained affordability and spiked mortgage rates haven’t translated into a greater pullback in national home prices.   The 5 states where inventory is still most below pre-pandemic levels: Connecticut: -76%  New Jersey: -69%  Illinois: -67%  Vermont: -67%  Rhode Island: -64% Just these 3 states have seen inventory climb above pre-pandemic levels:  Texas: +5% Idaho: +4%  Florida: +0.4%

This week, analysts at LendingOne set out to find the pockets of the country where population is rising and falling over the past year. Population fluctuations significantly influence local housing markets by directly affecting housing demand. Sustained population growth, helps to maintain long-term upward pressure on home prices and rents.    LendingOne’s top-line findings:  60% of U.S. counties gained population in 2023 The most significant population gains were once again observed in the U.S. Southeast, Mountain West, and Texas. The most significant population declines were in pockets of the Midwest, Northeast, and California.   For the analysis, LendingOne sourced data from the U.S. Census Bureau. Let’s take a closer look at the year-over-year change between 2022 and 2023.     The map above illustrates the ongoing rapid population growth in Sun Belt markets such as Florida and east/central Texas. These regions benefit from favorable climates, economic opportunities, and appealing lifestyle amenities, attracting both domestic migrants and international immigrants. Compared to cities like Seattle and New York City, Sun Belt counties like Harris County, Texas (Houston) and Hillsborough County, Florida (Tampa) are perceived as more affordable. Additionally, Tennessee, Texas, and Florida receive an extra boost due to their lack of state income tax.     Population dips in certain parts of the Northeast and Midwest can be attributed to aging demographics and the outmigration of younger residents. While the population decline in high-cost West Coast markets like Los Angeles County boils down to a lack of housing affordability.     While sustained population growth can hint at long-term upward pressure on rents and prices, don’t be fooled into thinking that falling population means prices and rents have to fall in the short-term. Often they don’t. In fact, most of the places with falling population right now are still seeing slight increases in single-family rents and home prices   What’s the big picture story? The Sun Belt’s sustained population growth underscores its status as the economic engine for expansion in the country, attracting both residents and businesses. That’s why it continues to be at the epicenter of housing sector investments, like build-to-rent.

This week, analysts at LendingOne set out to find the top single-family rental markets where, despite spiked mortgage rates and spiked home prices, investors can still find cash-flowing properties. LendingOne’s top-line findings:  A lack of inventory presents a double-edged sword for investors. On one hand, it helps to maintain the value of investors’ current portfolios; on the other hand, it makes it more challenging to find cash-flowing properties. Many of the best cash-flowing opportunities right now are in lower-cost Midwest and Northeast markets. Single-family rental investors are finding fewer cash-flowing opportunities in high-cost coastal markets like San Francisco, as well as pandemic boomtowns like Salt Lake City and Austin. For the analysis, we sourced data from ATTOM Data, which encompasses regional median rents and median home prices in the nation’s largest counties. A gross rental yield was calculated by dividing the annualized gross rent income by the median purchase price.   Among the 50 largest U.S. counties, these 5 have the highest annual gross yields: Wayne County, Michigan: 12.0% Allegheny County, Pennsylvania: 11.2% Cuyahoga County, Ohio: 10.2% Cook County, Illinois: 10.1% Riverside County, California: 9.7%   Among the 50 largest U.S. counties, these 5 have the lowest annual gross yields: Santa Clara County, California: 3.0% Honolulu County, Hawaii: 4.1% Fairfax County, Virginia: 4.2% Kings County, New York: 4.4% Alameda County, California: 4.4%     What’s the big picture story?  Spiked mortgage rates, which came right after a period of historic home price growth, have made it increasingly difficult for investors to uncover new cash-flowing single-family properties. LendingOne finds this challenge is particularly pronounced in high-cost markets like D.C., Salt Lake City, and San Francisco. Instead, investors are discovering better success in affordable pockets of the Midwest and Northeast, regions they had previously overlooked. In places like Cleveland and Pittsburgh, home prices haven’t stretched as far beyond local incomes and rents.

This week, LendingOne analysts looked at single-family rent data to better understand what investors are seeing across the nation right now.  LendingOne’s top-line findings:  Single-family home rents continue to grow nationally year-over-year, albeit much slower than they did during the Pandemic Housing Boom. U.S. single-family rents rose 4.7% from May 2023 to May 2024.  More affordable metros in the Midwest and Northeast are seeing the fastest single-family rent growth, indicating opportunities for increased cash flow for investors in these markets. Southwest Florida markets, which experienced some of the highest rent increases during the Pandemic Housing Boom, are now softening. For this analysis, LendingOne used Zillow Observed Rent Index (ZORI) data and calculated 12-month interval rent shifts for 240 metropolitan areas.  The table below shows the single-family rent shifts in just the 50 largest markets.     LendingOne analysts found that among the 240 metros that had ZORI data for May every year from 2019 to 2024: These 5 metros saw the biggest single-family rent growth from May 2023 to May 2024: Atlantic City, New Jersey: +21.2% Flint, Michigan: +13% Burlington, North Carolina: +11.7% Peoria, Illinois: +11.3% Roanoke, Virginia: +10.5% These 5 metros saw the biggest single-family rent decline from May 2023 to May 2024: Lake Charles, Louisiana: −3.8% Punta Gorda, Florida: −2.0% Cape Coral, Florida: −0.9% Austin, Texas: −0.5% Crestview, Florida: −0.2%     The supply of single-family rentals in the Sun Belt has increased significantly in recent years. As this new supply, particularly build-to-rent construction in markets like Phoenix, Dallas, Orlando, and Atlanta, comes online, rent growth has softened.  Meanwhile, in Midwestern and Northeast markets like St. Louis, Cleveland, Cincinnati, Buffalo, and Milwaukee, where there is less new rental supply coming online, rent growth has not decelerated as much. The biggest outliers right now are the Southwest Florida metros, particularly markets like Punta Gorda and Cape Coral, where they are seeing small outright year-over-year single-family rent declines. These markets have experienced a slowdown in migration following Hurricane Ian in September 2022.  Big Picture: While national single-family rent growth has decelerated significantly since the Pandemic Housing Boom, it is still rising year-over-year in most housing markets.