Local real estate investors are the quiet undercurrent in an otherwise stationary housing market. New Western surveyed 1300 investors about their REI business and these are the top takeaways for mid-year 2024.
Local Investors are Key Players in Housing Inventory: Independent investors, often local and small business owners, continue to significantly address the housing inventory shortage ahead of institutional investors and builders.
Demographic Shifts Among Real Estate Investors: The real estate investing landscape is diversifying, with Gen Z and female investors becoming more prominent.
Local Investors Make a Positive Impact on Affordable Housing: Local investors are pivotal in making housing more affordable by revitalizing neglected properties and returning them to the market at lower price categories.
Seven percent mortgage rates, tight housing inventory, and a lack of 4.5 million homes to keep up with family formation all contribute to a housing market that feels like a ship afloat waiting for rescue. And like a good tugboat, the independent investor creates flow by placing outdated, distressed, and vacant homes back into inventory.
New builds in New Western markets last year
Flips in New Western markets last year
Never before has the gap been so close–flippers are nearly outpacing builders when it comes to adding new inventory to the housing market.
New housing inventory is primarily being supplied by two sectors: builders and local investors. But new construction can’t keep up with the demand for housing, particularly starter homes, alone. In anticipation of ongoing elevated mortgage rates deterring buyers, builders have slowed construction, but demand still remains for all homes in the affordable range. While builders remain cautious, local investors are selling more flipped homes than builders in several markets and are close to matching those numbers in others across the country. There's endless opportunity for flippers to bring additional liveable inventory market. Many longtime homeowners are aging out of their homes, ready to downsize. Millions of vacant and aging homes across the country are prime for rehabbing and returning to market.
*New Western Data is 2023 totals
**New Build Sales Data from Zillow
“The last leg in the inflation fight is to reduce shelter inflation, and this can only occur if builders are able to construct more attainable, affordable housing. Local investors are also a part of the housing ecosystem to work towards finding an equilibrium between supply and demand. As we enter the second half of 2024, higher costs and rates remain obstacles.”
Chief Economist and Senior Vice President for Economics and Housing Policy for NAHB.
Following the post-pandemic Great Resignation from the corporate world, a new group of entrepreneurs launched REI businesses to chase the American Dream. During 2023, 68 thousand new investors looking for properties to rehab were added to the New Western marketplace. These aren’t the institutional investors reportedly snatching up 100-plus properties in a single community. These are small businesses, many just getting started. Contrary to headlines that suggest huge national corporations are taking affordable homes away from the average homebuyer, the institutional buyer market share has decreased 52% from 2021 to 2023.
New Western investors primarily purchase between 1-5 properties per year, and the majority are doing business within 30 miles of their home.
Not only do they bring diversity to the space, they’re trying new strategies that are paying off.
New Western Gen Z investors are highly ambitious with 79% having started their small businesses in the last few years. The amount of REI content available on YouTube and social media has allowed Gen Z to learn faster and absorb complex REI strategies using modern technology that they prefer.
Although they began in a high-rate environment, these Gen Zers expect major business growth of as much as 50% in 2024. They also plan to buy more properties than their Boomer, Millennial, and Gen X investor counterparts.
A majority of female New Western investors report being in business for less than 3 years compared to a majority of men being in business greater than 3 years.
These women are newer to the REI space but appear to be outperforming males in their REI businesses and they expect more business growth–19% of women expect 50% growth vs 13% of men.
Male investors usually allocate between $50,000 and $200,000 for rehab budgets, while female investors often spend less. Despite this, female investors achieve higher sales prices and quicker sales, highlighting their exceptional investment skills and market savvy.
“As a female real estate investor, I put myself in the mind of the female buyer, often the decision maker, and renovate homes to suit her lifestyle. Women bring a unique perspective to real estate investing, often focusing on creating value through attention to detail and fostering strong relationships with buyers and contractors.”
Phoenix Investor
With elevated interest rates and a high cost of living, homeownership feels out of reach for many first-time home buyers and handcuffs current homeowners who won’t move and vacate a historically low fixed mortgage rate. Builders struggle to construct affordable housing due to labor shortages and high cost of goods and must focus on higher price point homes to keep themselves afloat. It's the independent investors who’ve carved a space in the market and built businesses that also solve one of the nation's biggest issues - affordable housing.
Investors target homes within the affordability band that others avoid due to their poor condition. These lower-priced properties require significant updates and repairs that typical buyers don't want to tackle. By adding value to these unwanted homes, investors generate a strong ROI and create highly desirable and needed inventory.
“With aging housing inventory and increasing presence of first-time home buyers entering the housing market, providing renovations is of critical importance for ensuring accessibility to the housing as those first-time home buyers often times lack additional funding or expertise to ensure homes are updated and safer. This issue becomes more prominent as more baby-boomers age out of the housing market and their homes are in need of modernizing.”
Chief Economist, CoreLogic
Since 2008 we haven’t built enough homes to keep up with family formation and the once in a lifetime mortgage rates of 2021 now keep current homeowners in place. Yet the majority of homebuyers expect turnkey homes, especially when prices are high. This is the utility of local real estate investors, 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.
An inside look at New Western markets shows how independent investors are filling the housing gap in their communities and creating momentum across the country.
"I'm excited to be part of the REvolution with local investors. We're helping Americans achieve financial freedom and address the housing and affordability crisis. This 'Great Renovation' shows that builders and the government alone can't fix our housing infrastructure issues. Everyday local small businesses are making a real difference by flipping homes. With a shortfall of 4.5 million homes and millions of vacant and aging homes ready for renovation, these investors are just getting started in meeting community needs."
Co-Founder & President of New Western
These are our newer markets in the last few years that are taking off. 100+% growth in 2024
Birmingham, AL
Boston, MA
Chicago, IL
Washington, DC
Local investors are small business owners making an impact on housing inventory and their outlook on REI is positive. 91% of New Western investors expect their businesses to grow despite market conditions and 80% plan to flip 1-5 homes this year. With the majority of home buyers wanting a move-in ready home, not a fixer, these independent investors create a solution to the affordable housing crisis by returning turnkey inventory to the housing market at more affordable prices.
This report is an analysis of New Western market sales data and insights from opinion polling of 1,315 real estate investors from April to May 2024.
New Western surveyed investors ages 18+ who have previously purchased properties through its marketplace or plan to in the future.
This report is an analysis of New Western market sales data and insights from opinion polling of 1,315 real estate investors from April to May 2024. New Western surveyed investors ages 18+ who have previously purchased properties through its marketplace or plan to in the future.
All Redfin data was obtained from their publicly available resources.
Redfin is a national real estate brokerage
New Western market data represents a comparison of the year-over-year, daily average amount of deals from Q1 2023 to Q1 2024 and median acquisition prices were grouped by market.
*NW identifies flipped transactions (flips) using proprietary algorithms.
**All new build data was obtained from Zillow’s publicly available resources.
***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.
About New Western
New Western is a real estate investment marketplace that creates opportunity. We make investing more accessible for over 200,000 investors looking for rehabs inside the largest source of value-add properties in the nation. We buy and sell a home every 13 minutes in most major cities. New Western creates an advantage for all—a fresh start for sellers, exclusive properties for investors, and new, affordable inventory for the housing market.
Disclaimer
New Western is a licensed real estate brokerage that provides investors access to its marketplace of investment properties. The information provided within this material does not and is not intended to constitute legal, financial, tax, or real estate investing advice. New Western represents the seller in any resulting transaction and is not acting as an agent of the investor or any potential buyer in any resulting real estate transaction. The content published herein is provided “as-is” for informational purposes only. No representations are made that the content is error-free, and New Western does not make any representations or warranties as to the effectiveness of any investment strategy. This material does not create any warranty, contractual obligation, or agency relationship between any investor or potential buyer and New Western. New Western does not and cannot guarantee the accuracy of any information that was prepared by an unaffiliated third party. Buying real estate and engaging in real estate transactions involves varying degrees of risk, and investors and potential buyers should educate themselves on the potential risks by consulting their own advisors. Engaging in conversations with any New Western personnel does not constitute or replace the receipt of personalized advice from a professional engaged by the recipient of this material.
