New Western’s Monthly Market Snapshot – September Edition
Key Takeaways
Three key factors have the highest potential to create movement in the current housing market and make way for more inventory.
- A new construction boom
- The election in November
- Local investors as a constant undercurrent
Inventory
The inventory of unsold existing homes is slowly edging up. At the end of July, NAR reported a four-month supply compared to a 3.8-month supply in June. A six-month supply of unsold homes is typically considered a healthy and balanced housing market where buyers and sellers are both equally participating.
Rates and New Construction
With three potential Fed rate cuts still to come in 2024, new construction might be facing a boom leading into 2025. Positive lending conditions for regional builders could have an immediate short-term impact on housing supply. Builders will have access to cheaper capital to purchase and develop land, in addition to being able to offer more favorable mortgage products to their buyers.
Home sales remained sluggish in July and August but mortgage rates are finally decreasing and there is potential for even more favorable rates into 2025. Rate change will bring more buyers and sellers to the housing market and create more inventory but could also push prices higher. Overall, lower mortgage rates will make borrowing more affordable with a more reasonable monthly mortgage payment.
New construction inventory will make a dent in housing supply but builders won’t be able to solve the need for smaller homes that are in demand from first-time buyers. Local investors will continue to gain momentum on the builders, flip homes, and get these rejuvenated properties onto the market.
Campaign Policies
No matter which candidate wins the presidential election in November, both Trump and Harris are making the lack of affordable housing a part of their campaigns. Although housing supply has been an ongoing issue since the under building of new homes began in 2008, this long-standing issue is finally getting attention that will potentially lead to solutions.
Team Harris/Walz has plans for a $25,000 down payment assistance program to be offered to 4 million first-time homebuyers in addition to calling for the construction of 3 million new housing units over the next four years.
Team Trump/Vance are pushing to free up portions of federally owned land to build homes.
Even though the institutional buyers and Wall Street investors have basically left the single-family home playing field, both presidential parties want to stop Wall Street investors from buying and marking up homes that could have gone to first-time homebuyers.
Any action against large institutional investors like Blackstone owned Invitation Homes or AMH is unlikely to have any noticeable positive impact on homeowners if legislation is actually passed.
While there have been brief periods where Wall Street investors acquired a significant percentage of homes, these were primarily short-term trends. The vast majority of these purchases are made by small, local investors who typically own fewer than five homes and generally make an outsized positive impact on homeownership and affordability.
Kurt Carlton – President and Co-founder, New Western
The institutional buyer market share has decreased 52% from 2021 to 2023.
Affordable Inventory Assistance from Local Investors
Fix and Flip Investors returning inventory to the market
As mortgage rates tiptoe down into 2025, local investors should see more buyers looking for flipped houses and will have access to more affordable capital to purchase properties.
66% of New Western investors operate on a fix-and-flip model – meaning they revitalize the home and return it to the market for a homeowner to purchase, and the remainder create rentals from previously unlivable or vacant homes. And these flipped homes typically sell at prices below the median sales price of the market. Within the 42 markets New Western operates, investors are delivering homes back to the market 21%* below the average, showcasing their contribution to affordable housing.
Market Homes vs Flipped Homes Sales Price
*NW identifies flipped transactions (flips) using proprietary algorithms.
In our closely tracked New Western business territory, aggregate average sales price of deals investors put on the market is 21% below aggregate average sale prices overall.
Landlords and Rental Prices
In August 2024, rent rates had the biggest annual increase since April 2023 with median rent at $1645 per month nationally, according to Redfin.
And while there was an overall price increase, some local markets experienced rises and others saw large decreases. Austin, Texas had a 17.2% year-over-year decrease in asking rent, and San Diego, California had a 13.3% decrease. In markets, like Austin, there have been a historic number of multi-family buildings completed in 2024 creating more supply than demand, causing landlords to make adjustments to rent rates.
On the flip side, several markets experienced impressive annual rent rate increases potentially creating opportunities for investors in these markets.
Virginia Beach, VA +15.2%
Baltimore, MD +11.3%
Chicago, IL +10.8%
Get to Know a New Western Investor Market – Boston, MA
Ready to take part in the Great Renovation? Boston, Massachusetts is a rapidly growing New Western market with some of the oldest homes in the nation that are in need of major rehab and make them ideal candidates for fix-and-flip investors.
A top-level university town and home to Harvard, MIT, and Boston College–Boston is a competitive real estate market with a strong rental demand. Not only is there a steady stream of students needing housing, there is also a thriving job market in tech, finance, and healthcare that drives urgency for housing and a low vacancy rate.
Upcoming Events
OCTOBER 1ST
President and Co-Founder Kurt Carlton speaks at Housingwire’s IMB Summit.
Loan products: Where the juice is worth the squeeze
Reverse. Non-QM. Home equity. Lenders are looking at product diversification more than ever, but every option has pros and cons. This session will look at product strategies, implementation challenges and where the juice is worth the squeeze.
OCTOBER 15TH
New Western’s Wholesale Acquisition Manager Jimmy Quigg teams up with Launch Control to talk deal flow and getting more properties through your pipeline.
