Monday Morning Quarterback
(Monday, December 16, 2024)
America needs more house-flipping. Here’s why. As you know, America needs more new homes — and more renovated homes. House ‘flippers’ just you and me are key to solving this dilemma. Modernizing aging homes boosts supply and can make housing more affordable. After all, the biggest cause of the housing crisis is a lack of inventory, and building more homes is clearly a critical part of the equation. But it’s simple math that building alone won’t solve this crisis. The shortfall between supply and demand for homes is estimated to top 7 million units, which means that even an ambitious goal of building 3 million more units won’t even get us halfway there. But there’s another piece of the puzzle that isn’t talked about enough: With so much of America’s housing stock built in the 1950s, 1960s and 1970s, millions of U.S. homes are long past their prime. Improving existing inventory is essential. The government invests in rebuilding highways and other infrastructure — so where is the focus on remodeling housing? The potential of revitalizing aging homes to increase the supply (and ease the affordability crisis) is enormous. According to the 2022 American Community Survey, more than 89 million homes in the U.S. are at least 35 years old, representing 62% of the total housing stock. Many of these homes are in dire need of modernization and renovation. There is a largely hidden economy of entrepreneurs across the country working to bring these older homes back online. They are popularly known as “flippers,” though that term has taken on a mixed reputation due to endless cable TV shows that either glamorize or distort our industry.?The truth of the house-flipping economy isn’t glamorous. It’s composed of investors who turn outdated, often vacant properties into modern, desirable homes. The vast majority of revitalized homes aren’t turned into luxury products; they are designed for individuals and families looking for affordable, quality places to live.?So how can the U.S. spur this activity? Here are some ideas for a crucial industry where there hasn’t been enough policy creativity:
1.???Treat ‘house-flipping’ profits as capital gains:?Opportunity Zones were created in 2017 to give investors assistance in investing in distressed areas of the country. Scott Turner, Trump’s nominee to head U.S. Housing and Urban Development (HUD), is the former executive director of the White House Opportunity and Revitalization Council. Turner worked extensively to advance the Opportunity Zones program. If he and lawmakers are looking to update and expand this economic development tool, they may want to consider incentivizing house-flipping in those zones. This would help improve the housing stock while encouraging value-creating small businesses. A simple tax incentive could treat flipping profits as capital gains instead of the ordinary gains they are normally categorized as.
2.???Expand the Fannie and Freddie mandate:?There have been reports of plans?to consider privatizing Fannie Mae?and Freddie Mac. Whether or not that occurs, the U.S. may benefit from these companies carving out a portion of their portfolios for structured finance products including “fix-and-flip” loans. The result would be taking a fairly opaque market with a high cost of capital and significantly lowering the cost of a loan (leading to increased investment and more improved homes).
3. Extend SBA loans to flippers:?While the Small Business Administration (SBA) has a range of loan schemes that support entre-preneurs starting and scaling small businesses, there are no designed programs that flippers can use to readily finance their business expend-itures, including purchasing and renovating homes. The government supports business-owned real estate and other inventory assets under the SBA — so why not do the same for revitalizing homes? If the SBA were to update the mandate for an existing offering or create a new class of loans for this sort of economic activity, then the barrier to entry for flipping would be significantly reduced.
These are just three ideas. No doubt countless others exist. Regardless, it’s hard to credibly argue that flipping doesn’t have a role to play in solving the housing affordability crisis. In other real estate investor news, let get under the hood…
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U.S. Housing Costs Have Slowed After Years of Price Hikes. Robb Reports says home prices in the U.S. reached a record high?over the summer, but the trend of rapid price hikes appears to be slowing.?“Home price growth stalled in the third quarter, after a steady start to 2024,” Brian D. Luke of S&P Dow Jones Indices explained in a statement.?After years of hefty increases, costs nationally rose just 3.9 percent from a year prior in September 2024. By comparison, that’s a decrease from August’s 4.2 percent, according to new data?published by S&P CoreLogic Case-Shiller. The index also took into account housing prices in the country’s biggest cities and found that rates increased 5.2 percent in August but only 4.6 percent in September, an early indication that a market shift may be on the horizon.?Of the 20 bustling metro areas analyzed in the report, New York, Cleveland, and Chicago?recorded the biggest gains in September with substantial upticks of 7.5 percent, 7.1 percent, and 6.9 percent, respectively. Interestingly, the three cities also had the fewest number of active listings compared to the same time last year, per Realtor.com. In terms of where in the nation prices are slowing the most, that would be Tampa, Florida, and Portland, Oregon. That may have to do with the number of listings in the Mile High City and The Big Guava being up 62 percent and 72 percent over a year prior. “Sales prices of existing homes falling is a bit of good news for buyers, and while 2024 will go down as one of the worst years for sales, maybe we’re finally seeing a sustained deceleration in price increases,” Robert Frick, corporate economist with Navy Federal Credit Union, told Bankrate. “With mortgage rates up recently, the price drop will be lost in overall housing affordability.?But together with lower mortgage rates next year, as many are forecasting,?a slowdown in price increases could mean markedly improving conditions for buyers in 2025.”?
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Ten Best Real Estate Markets for Investors. Investor Marco Santarelli reports that finding the?10 best real estate markets for investors?is the first step to becoming successful real estate investor. It's not just about luck; it's about smart choices, solid research, and knowing where the opportunities are hiding. These ten markets currently show impressive growth potential for investors, but remember: real estate investment involves risk. Before we dive into the?10 best real estate markets for investors, let's clarify what makes a market “best.” It's not solely about high prices; it's a complex mix of factors. We'll consider:
·????????* Strong Rental Demand:?Are there plenty of renters looking for places to live? High demand translates to higher rental yields, a key factor for investors.
·????????* Property Appreciation:?Is the value of properties in the area steadily climbing? This is crucial for long-term investment returns.
·????????* Job Growth:?A thriving job market attracts residents, fueling rental demand and boosting property values.
·????????* Affordable Housing:?Even in growing markets, relatively affordable properties can be a great entry point for investors.
·????????* Low Vacancy Rates:?Low vacancy rates indicate high demand, making it easier to find tenants and maintain occupancy.
·????????* Economic Stability:?A stable local economy is less likely to experience sudden downturns, protecting your investment.
These factors work together, so it’s not just about picking the highest-priced area. You need a well-rounded approach. Based upon the above criteria, here are Marco’s ten best markets for investors right now:
Gavin Newsom Drops $9.1 Million on Bay Area Home. Around three-and-a-half years after he sold his Marin County?home in a lucrative off-market deal for nearly $6 million and relocated to Sacramento, California Governor Gavin Newsom has decided to make a return to the Bay Area. After all, Newsom can’t be governor forever. The San Francisco native plans to split his time between Sacramento and Marin County, where his four children are reportedly already enrolled in school. Records show Newsom, whose gubernatorial term ends in 2027, and his documentary filmmaker wife Jennifer Siebel Newsom have paid billionaire Hyatt Hotels heir Daniel Pritzker $9.1 million (about $600,000 over asking) through a private LLC for a midcentury modern abode in the affluent unincorporated community of Kentfield, about 20 miles north of San Francisco. First listed in summer 2023 for just under $11.5 million, the place underwent several price chops before landing at its final ask of $8.5 million. Secluded amid a leafy parcel spanning nearly an acre and touted in marketing materials as “architecturally stunning and magazine worthy,” the wood-clad structure was built in 1948 and offers six bedrooms and an equal number of baths in a little more than 5,600 square feet of living space on three levels. Stylish interiors are adorned throughout with rich hardwood floors, high ceilings, and large windows framing picturesque views of Mount Tamalpais. Though photos are scarce, online listings show a sunken living room sporting a wet bar and a double-sided fireplace that steps up to an adjacent dining area. A gourmet kitchen is outfitted with an eat-in island, top-tier stainless appliances, and an accompanying breakfast nook, while a fireside family room has floor-to-ceiling folding glass doors spilling outside. Other notable features include an office, two primary suites, and resort-like grounds hosting outdoor sculptures, a pool and spa nestled alongside a wood deck and a fire pit, and an array of spots for alfresco lounging and entertaining. There’s also a guesthouse, plus a three-car garage flanked by a spacious motor court. In addition to his new Marin County home, the possible 2028 presidential candidate also lays claim to a $3.7 million residence in suburban Sacramento’s Fair Oaks neighborhood, near the State Capitol building.
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Bill Cosby Is Facing Foreclosure in New York. Meanwhile, on the other coast, Bill Cosby?is facing foreclosure at his townhouse at 243 East 61st Street in Manhattan.?As first picked up by Pincus Company, the 87-year-old, who was released from prison in 2021 after the Pennsylvania Supreme Court overturned his 2018 sexual-assault conviction, apparently owes $4.2 million on the Lenox Hill mansion. Camille Cosby is also named in the suit, filed by CitiMortgage on December 2. Bill Cosby, who has been accused of sexual assault and misconduct by more than 50 women, bought the 5,000-square-foot, four-story brownstone in 1980 for a reported $327,000. Cosby’s late son, Ennis, was reported to live there?before his death in 1997. Even if Cosby loses the house on East 61st, it appears he’s holding on to his?other?Lenox Hill home — just ten blocks up on East 71st. The 12,000-square-foot neoclassical mansion was traded among private schools until 1987, when Cosby bought it for a reported $6.2 million and kicked off a multi-year renovation. That house is just a few doors down from 9 East 71st Street, Jeffrey Epstein’s former residence, which was snapped up in 2021?by a Goldman Sachs executive for a cool $51 million. A lovely block.
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There’s No ‘Secret Sauce’ To Real Estate Investing. TV’s Property Brothers Jonathan and Drew Scott?still believe in the opportunity to grow wealth through real estate investing, but there are important factors to consider in today’s market, they told CNBC’s Diana Olick. “I absolutely believe in buying houses as a good investment,” Jonathan said. One of those key factors: Individuals should only invest in property?on their own timeline, Jonathan said. It can feel like you’re missing out if you don’t already own or aren’t planning to buy tomorrow, but acting on that emotion could hurt your ability to make a smart investment. Buyer’s remorse is common among recent homebuyers: 82% of people who bought homes in 2023 or 2024 have at least one regret, a recent survey from real estate company Clever found. Among those with regrets, choosing a home that needs excessive maintenance and repairs are the most common reasons, though nearly a quarter of respondents said they paid too much or accepted an interest rate that’s too high. Once you’re sure you want to invest, it’s also wise to accept that you may not be able to time the market to deliver the best results for you. Finding a property in your price range and landing the best mortgage rate will depend not only on your financial situation, but also the broader economy. That being said, investing in real estate and buying a home is “not rocket science,” Jonathan said. “You have so many people that think there’s a secret sauce to be successful, and really it comes down to budgeting.” The median sale price for U.S. homes is well over $400,000, according to Federal Reserve data, meaning a 20% down payment will cost around $80,000, or more if non-owner occupied investor. When it’s time to start your search, make sure your expectations are in line with reality. You may have to make compromises on location, size or amenities in order to stay within your budget. Prices on essentials like rent and groceries remain significantly higher than several years ago, making it difficult for hopeful buyers to save. “You have to find creative ways to invest into the market now,” Jonathan said.?That might look like buying a house with friends, or family members, or partners.?
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Homeowners Are Using This Hack To Cut Their Mortgage Payments In Half.?Homeowners in housing-starved areas like California have turned to a lower-friction way of adding supply. California homeowners are embracing tiny homes in their backyards (accessory dwelling units, affectionally known as “ADU’s”), a movement that has offered a blueprint for cities across the U.S. that are grappling with a housing shortage.?The move by thousands of other homeowners across the U.S. to create additional housing units on their single-family lots presents one small piece of the solution to the country’s ongoing housing-affordability crisis, advocates say. Home prices and mortgage rates are too high for many Americans to afford. A typical family would need to make about $106,000 to afford a home worth $343,000 without stretching their financial limits, according to an analysis?by Zillow in February. The company assumed a mortgage rate of 6.6% for its analysis. Today’s rates and home prices are even higher: The 30-year mortgage rate was over 7% as of last Thursday, and the median price of an existing home?in September was about $404,500.?In our home state of California, one of the most expensive states in the country, ADUs have become a common tool for getting around highly restrictive zoning laws that make it difficult to build multifamily homes. In California, one in every five permit applications to build new construction in 2023 were for an ADU, according to data?from the California Department of Housing and Community Development. Los Angeles led the state in terms of the number of ADU units permitted to be built that year. That enthusiasm for building more housing without changing local zoning laws has spilled over to other cities and states, as well. New Jersey cities and towns such as Jersey City, Maplewood, and Montclair, as well as states such as New York and Vermont, have ramped up efforts to entice homeowners to build more ADUs.?The cost to build an ADU can vary between $40,000 and $360,000, according to the home-improvement platform Angi.??
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Highly Intelligent ‘Super Pigs’ Are Invading America. Something strange is stirring in America’s northern plains. Farmers, wildlife experts, and even ecologists are sounding the alarm about an unexpected invader: super pigs. These aren’t your typical barnyard animals or garden-variety feral hogs. They’re smarter, tougher, and spreading faster than anyone anticipated. Originating in Canada,?these hybrid creatures are moving southward, leaving destruction in their wake. They’ve adapted to survive harsh winters, evade capture, and disrupt the delicate balance of ecosystems. What’s driving their unstoppable spread, and why are they so difficult to control? The answers could change how we approach invasive species—and protect the landscapes they’re tearing through. What started as a practical solution in Canada’s farming industry has spiraled into an ecological nightmare. Back in the 1980s, farmers bred domestic pigs with Eurasian wild boars to create hardy hybrids capable of surviving harsh winters and increasing meat production. On paper, it seemed like a win-win—tougher animals and higher yields. But when the demand for wild boar meat plummeted, the story took a dark turn. Left with few options, some farmers released these resilient hybrids into the wild. What followed was a perfect storm: animals designed to thrive in challenging conditions adapting, reproducing, and spreading across Canada’s provinces. These “super pigs” didn’t just survive—they thrived, thanks to their intelligence and ability to evade traditional control methods. Now, they’re pushing toward the northern United States, creating new challenges for wildlife managers and farmers. The unintended consequences of this farming experiment highlight a harsh truth: innovations, no matter how promising, can spiral out of control when the balance of nature is disrupted.
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Vendors Expo Returns!?Our world-famous "Vendors Expo"?returns in 2025, on Thursday night,?January 9, 2025. The Vendor Expo opens starting at 6:30 pm. We'll have 30+ of the finest vendors featuring real estate products and services you will want to utilize as a successful investor. Our Vendor Expo will be held at the Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Culver City CA.?FREE Admission.?Please RSVP at our website, LARealEstateInvestors.
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“Wholesaling” When it comes to wholesaling, there is only one guy you need to learn from.?His name is Daniel Tromello. Daniel has not only wholesaled hundreds of properties throughout Southern California, he has traveled the country preaching the virtues of wholesaling.?Daniel will be our special guest speaker at our first general meeting of 2025. The title of Daniels’s presentation is “How to Wholesale Like a Pro.” Don’t miss Daniel’s presentation. Thursday night, January 9, 2025, 6:30 to 9:30 pm. And be sure to come early (6:30 pm) and enjoy our Vendors Expo. Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Los Angeles, 90034 (Culver City adjacent).?FREE Admission. Metered and free street parking. RSVP at our website, LARealEstateInvestors.com.
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Basic Training Investing Boot Camp. Saturday, January 25, 2025, 9:00 am to 6:00 pm, will be our semi-annual Basic Training Boot Camp. Everything you ever wanted to know about real estate investing but were afraid to ask. Iman Cultural Center, South Hall, 3376 Motor Avenue (between National and Palms), Los Angeles, 90034.The cost of the Boot Camp is $149.00 per person if paid before January 18. After January 18, the prices jumps to $249.00 per person. So don’t wait to register. (Gold Members and former Boot Campers can attend for FREE, but still need to register.) Plus free parking. Please register at our website, LaRealEstateInvestors.
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This Week. The next Fed meeting will take place this Wednesday. Investors anticipate a 25-basis point reduction in the federal funds rate and will look for additional guidance on future monetary policy. For economic reports, Retail Sales will come out on Tuesday from the Census Bureau. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of the economy. Housing Starts will be released on Wednesday from the Commerce Department. and Existing Home Sales on Thursday from the National Association of Realtors. Personal Income and the PCE price index, the inflation indicator favored by the Fed, will come out on Friday.
Weekly Changes:
10-Year Treasuries:?????????????Rose??020 bps
Dow Jones Average:???????????Fell????700 points
NASDAQ:????????????????????????????Rose??150 points
Calendar:
Tuesday (12/17):?????????????????Retail Sales
Wednesday (12/18):????????????Fed Meeting
Friday (12/20):?????????????????????Core PCE
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For further information, comments, and questions:
Lloyd Segal
President
Los Angeles County Real Estate Investors Association, LLC
310-792-6404
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President - Cooper Properties LLC - REALTOR Lic # 02169438
2 个月AMEN !!