New Western [1] has released a report—The Flip Side 2.0: An Outlook for Residential Real Estate Investing in 2023 [2]—on single-family real estate investor sentiment in the U.S. and an overview of the top growing markets right now. The report found that approximately 60% of survey respondents believe the U.S. is in a housing shortage, and as a result, 80% of the surveyed investors are selling homes at or above asking price after renovating the properties to make them habitable.
New Western operates in most major cities, connecting more than 150,000 local investors looking to rehab houses with sellers.
According to the report, from Q1 2023 to Q2 2023, New Western saw double digit growth in more than a dozen markets, including:
- Boston (88%)
- Washington, D.C. (50%)
- Charlotte, North Carolina (49%)
- Jacksonville, Florida (48%)
- Houston, Texas (46%)
Other notable markets that grew from Q1 2023 to Q2 2023 include Atlanta and Dallas. As New Western investor activity grew across these markets, the retail market saw a decrease of 40% or more according to Redfin data, showcasing how investors are bullish on finding opportunities despite negative market sentiment.
Approximately 55% of survey respondents said location/neighborhood was the most important consideration to their buyers. As consumers look to find more housing options, investors are delivering much needed supply back to the market. On average, homes purchased through New Western that are later renovated sold for 31% less than new traditional homes for sale in the same market.
"Investor sentiment is positive right now as they haven't let the macroeconomic environment slow them down," said Kurt Carlton, Co-Founder and President of New Western [3]. "The U.S. is lacking about 320,000 listings valued at the affordable range for middle-income buyers. These investors see the housing shortage as an opportunity to deliver homes for buyers where the payoff is larger than the profits."
The Flip Side 2.0: An Outlook for Residential Real Estate Investing in 2023 [2] is an analysis from insight based on both New Western sales data, as well as opinion polling in May and June 2023 from more than 1,350 of its real estate investors ages 18 and up nationwide who have previously purchased property through New Western or plan to in the future. A majority of the survey respondents are ages 26 to 57. Nearly 30% are ages 26 to 41, more than 40% are ages 42 to 57, and approximately 15% of survey respondents are 58 to 67. Slightly more than 70% of respondents invest in the Southwest and Southeast regions of the U.S. specifically, while roughly 70% of respondents fund their investments through hard money or investment financing, and about 30% through cash.
The National Association of Homebuilders (NAHB) projects the construction of 830,000 homes this year [4], but what goes unnoticed is the expected 350,000 home flips involving vacant and uninhabitable properties revitalized by independent rehabbers. These rehabbers are stepping in to address scalability challenges and fill the gaps in individual markets, driven by demand. For the remainder of 2023, investors are confident in the residential real estate market; about 70% of respondents plan to invest in one to three properties, and 75% saw business growth from the second half of 2022 to date.
A recent Zillow report [5] has found that a significant lack of new, affordable housing is fueling the nation’s ongoing affordability crisis. This shortage is specifically impacting potential Millennial and Gen Z buyers who are at the prime home-buying time of their lives, and are looking to enter the market for the first time.
The lack of affordable options for young singles and families has created what are called “missing” households—defined as a potential homeowner who lives with family members in owned or rental housing. According to Zillow in 2021 [5], there were nearly eight million missing households compared to 3.7 million dwellings units available for rent or sale, resulting in a deficit of 4.3 million homes.
"The U.S. housing market is like a high-stakes version of the game musical chairs," said Orphe Divounguy, Senior Economist at Zillow [6]. "There are simply not enough homes for millions of people. Unless we address the shortage of smaller, more-affordable, starter-type homes, we risk leaving families without a seat—and it will only get worse over time."