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Some respondents said a souring economic climate could keep them from buying in 2023. One homebuyer told Insider that she is considering moving to a new state to afford a home. "I got sick of wasting money on rent and wanted to see what I could qualify for, but it has not been promising," Jenner told Insider. To Elizabeth Renter, a spokesperson for NerdWallet, these survey results show that many homebuyers may be in for a "rude awakening" in 2023. However, Renter said many homebuyers are still facing an uphill battle when it comes to buying a home.
For first-time homebuyers like Talej, the outlook has never been bleaker. This unfortunate combination means first-time buyers are waiting longer to purchase homes and winning out with less frequency than ever before. And during that year, first-time buyers accounted for just 26% of all home purchases, the lowest percentage ever, according to the NAR. The percentage of first-time homebuyers who were white hit a two-decade high of 88% last year, up from 83% in 2003. These trends only compound the bad economic news for millennials, who make up the majority of today's first-time buyers.
First-time homebuyers are 'royally screwed'
  + stars: | 2023-01-22 | by ( James Rodriguez | )   time to read: +13 min
For first-time homebuyers like Talej, the outlook has never been bleaker. And during that year, first-time buyers accounted for just 26% of all home purchases, the lowest percentage ever, according to the NAR. The racial makeup of first-time homebuyers also set records in 2022, but the lack of progress in Black homeownership was perhaps most shocking. The percentage of first-time homebuyers who were white hit a two-decade high of 88% last year, up from 83% in 2003. Hope is a fickle thingThere's some slight relief on the horizon for first-time homebuyers.
VC investment fell by 38% in 2022, but the technological transformation of real estate continues. investment fell by 38% in 2022, but the technological transformation real estate continues. Early innovators like Zillow showed that there was a place for real estate on the internet, while investments from firms like SoftBank showed that big money was paying attention. Insider has collected 32 pitch decks that successful firms have used to raise funding from VCs and private-equity firms. Clockwork AnalyticsThe pandemic laid bare the necessity of a technological transformation of commercial real estate.
Remote work pushed housing trends into warp speedIn some ways, the pandemic's housing shifts were a long time coming. The shift to remote work also hastened many people's desire for more space. Across the country, remote workers chose to part ways with roommates or seek out larger homes. Elon Musk asserted his authority at Twitter by putting an end to remote work. On the other hand, as my colleague Aki Ito previously argued, a recession could further ingrain remote work as employers look to cut spending on real estate.
Insider's rising stars of real estate span roles in leasing, affordable housing, and urban planning. We asked 20 of these young industry experts and innovators to offer predictions for 2023. 2022 wreaked havoc on the housing market: Mortgage rates rose at a fast clip, bidding wars cooled, the Airbnb market shifted, and some high-flying proptech darlings crashed back down to earth. Insider picked 30 rising stars of commercial and residential real estate who're transforming the way homes are sold and offices get built. Here are the predictions for 2023 from our rising stars:
Insider's rising stars of real estate span roles in leasing, affordable housing, and urban planning. We asked the young achievers about the books that influenced their careers or personal growth. For some of Insider's rising stars of 2022, the subject matter might surprise you. Other rising stars told Insider they wanted to learn from the trials and tribulations of successful people, like the Nike cofounder Phil Knight. Below, find the selection of 29 books that influenced the rising stars, along with their musings of what they learned or how they applied the lessons to their practices.
Institutional investors have earmarked as much as $110 billion to buy or build single-family homes. Institutional investors now own about 3% of the roughly 20 million single-family-rental homes in the US, according to Roofstock, an online marketplace for single-family investment properties. That would be nearly 9% of the roughly 88 million single-family homes in the US, according to the Census Bureau's most recent statistics from 2020. Better deals expected in the years aheadThere are signs the institutional investors won't have to wait long to begin buying. That leaves between roughly $70 billion and $80 billion that could still flow into the sector.
These standards are based on factors including the borrower's financial stability and the state of the housing market and economy. Finding the right size for the credit box is much easier said than done. A tidal wave of foreclosures followed, plunging the US housing market — and the global economy — into chaos. Even just stabilizing the credit box over time could also help smooth out some of the boom-and-bust cycles that have come to define the housing market. "If we do not address this intrinsic cyclicality, the housing market will continue to experience boom-bust cycles, leaving destruction in their wake," the paper said.
Meet Insider's third-annual slate of emerging talent in commercial and residential real estate. We selected 30 young professionals 35 and under whose leadership spans a vast industry. Insider has tried to capture the brightest of the bunch in our third-annual Rising Stars of Real Estate list. But real estate isn't all about making money. Presented in alphabetical order by last name, here are the rising stars of real estate for 2022.
Lennar, the nation's second-largest homebuilder, advertised Black Friday deals on its website. Lennar, the nation's second-largest homebuilder, advertised "Black Friday Deals on select move-in ready homes" at the top of the home page of its website as of Wednesday. Faced with the prospect of paying hundreds of dollars more for a mortgage each month, buyers retreated from the market in droves. Horton, the nation's largest homebuilder, said it was scaling back its production and offering more incentives to buyers to keep deals going. Buyers have continued to pull out of the market amid persistent inflation and high home prices.
The average rate for a 30-year mortgage just saw its biggest weekly drop in more than 40 years. The average rate for a 30-year mortgage just saw its biggest weekly drop in more than 40 years, according to Freddie Mac. A better-than-expected inflation report last week led to the biggest single-day mortgage-rate drop on record, according to Redfin. If interest-rate volatility declines, mortgage rates could keep falling as well, narrowing the distance from the 10-year Treasury yield. If that spread reverts to the historical average, that would put the 30-year mortgage rate at about 4.5%.
A recently introduced bill promises to rein in corporate owners of single-family rental homes. They scooped up thousands more during the COVID-19 pandemic as interest rates dropped and demand for rental housing soared. The introduction of the Stop Wall Street Landlords Act marks the latest escalation. "Low- and middle-income families in my district and across the country are being pushed out because of profiteering and unfair practices by large corporate landlords." But the watchful eye of federal lawmakers is sparking concern among large SFR companies.
Tricon Residential is one of the biggest owners of single-family rental homes in the US. Berman said the company expected to buy up 850 homes in the fourth quarter, for a total of 7,300 this year. Berman said the company was "slowing down today" so it could buy larger portfolios at discounted prices in the future. Single-family rental operators may be slowing down in the short term, but the biggest players have been adamant that the fundamentals of their business remain strong. "We also think that a lot of the startups in single-family rental may have trouble getting financing, and so maybe some portfolios shake loose.
Redfin said it expects home sales to keep falling through 2023, as it laid off 13% of its workforce. US housing companies are "in the jungle" now, its CEO said, as buyer demand falters. That means "housing companies are in the jungle now, but Redfin has been there before and come out stronger," Kelman said in separate press release. That would mean the number of existing home sales would drop from roughly 6.1 million in 2021 to roughly 4.3 million in the coming year. "The June layoff was a response to our expectation that we'd sell fewer houses in 2022; this layoff assumes the downturn will last at least through 2023," Kelman said in the memo.
The next frontier: making similar investments to buyers who need help with a down payment. Down-payment investments could help them avoid those costs, which can amount to hundreds of dollars a month. So we're gearing up for that," Riccitelli said, adding that down-payment investments represented "a massive opportunity." Indeed, one of the industry's trailblazers, Unison, stopped offering down-payment investments earlier in the pandemic, choosing instead to focus on traditional home-equity agreements. "One of the big mortgage companies is going to have to get in on it," the executive added.
John Burns Real Estate Consulting expects price drops of 20% or more for certain housing markets. Higher mortgage rates have wrecked demand for homes, but the firm says prices are still too high. Devyn Bachman, the senior vice president of research for John Burns, told Insider she had begun to expect "GFC-like pricing declines in certain markets." A survey conducted by John Burns last month found roughly 18% of homebuilders were already reporting year-over-year net home-price declines. "It's going to be a challenging one to two years for anyone involved in housing," Bachman said.
Build-to-rent communities skip the intermediary and go straight to the homebuilder. While typical single-family rental strategies, pioneered by Blackstone in the aftermath of the Great Recession, are inherently tied to the housing market, build-to-rent is not. In the eyes of private equity, there's no difference between build-to-rent communities and apartment blocks. If you value Cypress Bay as an apartment building, instead of a collection of homes, Fundrise got a good deal. Fundrise is still working on deals, Miller said, with a deal pipeline stretching out to 2025.
In late 2021, a wildfire tore through the Boulder suburbs and destroyed nearly 1,100 homes. Roughly 10 months after that blaze, known as the Marshall Fire, the vast majority of the burned lots remain vacant. "Open space with the ability to build what you want — that really doesn't exist in Boulder County," Jennifer Eiss, a Boulder real-estate agent with Compass, said. The median sale price for Marshall Fire lots that sold in the third quarter was $416,000, according to MLS data. Newer, more-sustainable building methods, combined with an emphasis on protective borders around homes, could help mitigate fire risks, Pechet said.
They were paying $750 a month for the lot in a mobile-home park and couldn't fathom paying $7,200 a year for homeowners insurance, let alone additional protections for floods. (Flood insurance costs an average of more than $600 a year in Florida and can stretch even higher in high-risk areas.) But just 57% of those homes are covered by flood insurance, a Bank of America analysis of data from CoreLogic and the National Flood Insurance Program found. Some owners may not even know that they need a separate insurance policy for flooding, assuming it's covered by their homeowners insurance. Roughly a dozen firms that provide homeowners insurance in Florida have gone under in the past two years, The Washington Post reported.
Floridians aren't paying enough for flood insurance, according to an analysis by DeltaTerra Capital. Home prices in some parts could fall by 50% when buyers realize the true costs of flood protection. Hurricane Ian left a trail of destruction across Florida, but the state's housing market has yet to feel the brunt of its impact. That's because flood insurance is poised to get much more expensive in high-risk areas as a result of Risk Rating 2.0 , the Federal Emergency Management Agency's updated method of pricing flooding risk for insurance policies held through the National Flood Insurance Program. It's not just a matter of how hurricane damage will affect a regional market, Burt said.
Like a lot of millennials, Enrique Gonsalves is a victim of poor timing. For most millennials, born between 1981 and 1996, the path to homeownership has been fraught with pitfalls and false starts. Add it all up, and the homeownership rate among millennials is lagging that of previous generations. Compared with these generations, millennials have more debt, a lower net worth, and a worse chance of making more than their parents. Those factors, particularly the rise in student debt, have prevented millennials from getting a home.
The losses are mounting for Opendoor as home prices fall in previously red-hot markets such as Phoenix, Southern California, and Las Vegas. Opendoor cut the listing price three times, ultimately dropping it to $657,000 before the property sold. Opendoor has since cut the listing price five times, most recently advertising the property at $417,000. Records on Zillow indicate Opendoor has reduced the listing price six times. As for the homes Opendoor is buying today, Wu said executives "expect those to perform well and in line with expectations."
That's left some big portfolios sitting on the market — but don't expect the lull to last long. This past summer, a huge portfolio of 2,000 homes hit the market. The market for single-family-rental portfolios, once red-hot, has slowed considerably as the biggest participants face higher borrowing costs and market volatility. The challenges aren't limited to big SFR portfolios. Deals are still getting done, too — one SFR portfolio traded in August for a little more than $140 million, according to a person with knowledge of the deal.
Housing affordability reached a new low as mortgage rates spiked while home prices remained high. The average rate for a 30-year fixed-rate mortgage hit a new pandemic-era high, jumping to 5.89% for the week ended Thursday, according to Freddie Mac. That payment-to-income ratio has reached its highest point in 35 years, eclipsing a previous high set in June, according to Black Knight. With fewer buyers competing for homes, sellers may be forced to cut their prices in order to reach a deal. "Given the large role affordability challenges appear to be playing in shifting housing market dynamics, the recent pullback in home prices is likely to continue," Walden said in a statement.
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