Property to Rent – Houses to Rent

Property to Rent – Houses to Rent

by Investment PropertyReal Estate News

Property to Rent – Houses to Rent

I still remember the first time I went house hunting as a tenant. My expectations were high—I wanted a big kitchen, a little garden for weekend BBQs, and of course, rent that wouldn’t eat up half my paycheck. Let’s just say I quickly learned that the rental market doesn’t always care about your wish list. I toured at least a dozen properties before realizing that compromise is pretty much part of the deal.

Over the years, I’ve rented in different neighborhoods—some were gems, others… well, let’s just say I wouldn’t go back. Through trial and error, I picked up a lot about how to actually find good houses to rent, avoid sneaky landlord tricks, and make smart decisions so you’re not regretting it six months later. If you’re on the hunt for a house to rent, maybe my story and the little lessons I’ve picked up can save you some frustration.

Why Renting a House Feels Different from Renting an Apartment

When I first moved out, I thought renting a house would be the same as renting an apartment, just bigger. Nope. Renting a house comes with extra responsibilities—sometimes you’re expected to mow the lawn, shovel snow, or even maintain the gutters. I once had a landlord who reminded me every month about trimming the hedges, and honestly, I had no idea how to use hedge clippers.

But the upside is space. Houses give you room to breathe, more privacy, and often better parking (unless you end up on a tight street where you’re battling neighbors for a spot). Plus, if you’re renting with roommates or a family, it just makes sense to have the extra bedrooms.

The Mistakes I Made Looking for Houses to Rent

Let me confess—I’ve made just about every mistake in the book. The biggest one? Not reading the lease carefully. One time, I signed without noticing the “no pets” clause, and two weeks later I showed up with my rescue dog. You can imagine how that went.

Another mistake was rushing. I once jumped on a property because I was afraid it would get rented out fast. Turns out, there was a major plumbing issue the landlord “forgot” to mention. Within a month, my basement was flooded. After that, I made it a rule: never sign until you’ve checked the water pressure, opened every cupboard, and asked way too many questions.

Tips for Finding Houses to Rent Without Losing Your Mind

Here’s what I’ve learned the hard way:

  • Set a realistic budget. Don’t just think about rent—add utilities, internet, trash collection, and sometimes even yard maintenance. A house I rented once looked cheap at first, but the heating bill in winter was triple what I expected.
  • Location matters more than you think. I rented a house once that was cheap and spacious, but it was 45 minutes from work. The commute wore me down and cost me more in gas than I saved in rent.
  • Inspect everything. Check the windows, doors, plumbing, and even the cell phone signal inside the house. I once rented a place where my phone dropped calls constantly, which made working from home a nightmare.
  • Ask about responsibilities. Will you be in charge of mowing the lawn or does the landlord hire someone? One place I rented gave me a fine for letting weeds grow too tall—I didn’t even know that was a thing!

Negotiating Rent – Yes, You Can Try

Most people think rent is set in stone. But I’ve actually had some luck negotiating. In one case, the landlord wanted $1,500/month, but the place had been sitting vacant for a while. I offered $1,350 and promised to sign a one-year lease right away. He agreed. The trick is to be polite but firm, and back it up with reasons—like pointing out comparable listings in the area.

Sometimes you can’t lower the rent, but you can ask for extras. I once got my landlord to include Wi-Fi and lawn care just by asking. It never hurts to try.

The Red Flags to Watch Out For

There are definitely some shady landlords and sketchy properties out there. A few warning signs I’ve learned to recognize:

  • They avoid paperwork. If someone says “we don’t need a lease, just pay cash,” run. That’s not just risky, it’s illegal in most places.
  • The rent feels way too low. If it seems too good to be true, it probably is. I once toured a house that was super cheap—later found out it had black mold in the basement.
  • They won’t let you tour in person. Always see the property before handing over money. I almost got scammed by someone who refused to show the house but wanted a “deposit” upfront.
  • Maintenance delays. If it takes them weeks to answer your questions while you’re still a potential tenant, imagine how slow they’ll be once you’re locked in.

The Emotional Side of Renting a House

I’ll admit—house hunting can get exhausting. At one point, I started to feel like every decent rental was out of my league. I’d scroll through listing sites at midnight, wondering if I’d ever find a place that checked enough boxes. Then, out of nowhere, the right house would pop up.

There’s something satisfying about turning the key on move-in day, walking into a space that finally feels like yours (even if just for a while). I learned to celebrate the small wins—like finding a rental with a dishwasher after years of scrubbing dishes by hand.

Moving Into a Rented House – What I Learned the Hard Way

Moving in is another beast altogether. My biggest regret? Not documenting the condition of the property. When I moved out of one place, the landlord tried to keep my deposit for “damaged walls.” Thankfully, I had photos from move-in day showing the scuffs were already there.

Now, every time I move, I take a full set of pictures and videos. I also make sure to test appliances right away—nothing’s worse than discovering the oven doesn’t work the night before Thanksgiving dinner (yes, that happened).

Making a Rented House Feel Like Home

One of the hardest parts of renting is that you can’t always decorate the way you want. I once asked a landlord if I could paint the walls, and he looked at me like I’d asked to tear the place down. But there are tricks—peel-and-stick wallpaper, rugs, and even smart lighting can transform a place without breaking the lease rules.

My favorite hack is command hooks. They let you hang art, curtains, or even lightweight shelves without leaving marks. A little personal touch goes a long way in making a rental feel less temporary.

Why Renting Isn’t Throwing Money Away

I used to feel guilty about renting, like I was just throwing money down the drain instead of investing in a home. But over time, I realized renting has its perks. You’re not tied down, you don’t have to pay for major repairs, and you can move if your job or life changes.

One year, I had to relocate suddenly for work. Because I was renting, it was simple—I finished out the lease, packed up, and left. If I’d owned a house, selling it would’ve been a nightmare. Renting gave me flexibility, and sometimes that’s more valuable than building equity.

Lessons I’d Share With Anyone Renting a House

If I could go back and give my younger self advice, here’s what I’d say:

  1. Don’t rush. The right property will come along.
  2. Read every word of the lease, even the boring parts.
  3. Take photos and keep records—it might save your deposit.
  4. Always ask questions, even if they feel silly.
  5. Remember, it’s temporary. Don’t stress if it’s not perfect.

Final Thoughts

Finding the right property to rent—especially a house—can be stressful, messy, and even a little discouraging at times. But when you finally land a place that fits your budget and lifestyle, it’s worth it. Over the years, I’ve learned to approach renting with patience, curiosity, and a healthy dose of skepticism.

Houses to rent aren’t just about four walls and a roof—they’re about the little stories you collect along the way. From broken dishwashers to surprise rent negotiations, every rental has taught me something new. And who knows, maybe the next one will be the one that feels just right.

Frequently Asked Questions About Houses to Rent

  1. How do I find houses to rent in my area?

The easiest way is to start online. Websites like Zillow, Rightmove, or local rental platforms usually list available properties with photos, rent prices, and landlord details. Don’t forget to check Facebook groups, community boards, and word of mouth—some of the best deals never make it onto big listing sites.

  1. How much deposit do I need for a rental house?

Most landlords ask for a security deposit equal to one month’s rent, but in competitive areas it can be up to six weeks of rent. This money is usually refundable as long as you leave the house in good condition when moving out. Always make sure your deposit is placed in a registered tenancy deposit scheme if you’re in the UK, or held in a secure account if you’re renting elsewhere.

  1. What checks do landlords do before renting a house?

Typically, landlords will run a credit check, background check, and employment verification. They want to make sure you can pay rent on time and have a stable income. Some landlords also ask for previous landlord references. If your credit score isn’t great, offering a guarantor or larger upfront payment might help.

  1. Can I negotiate rent on a house?

Yes, you can. If the property has been on the market for a while, landlords are often open to negotiation. You might not always get a lower monthly rent, but you could ask for perks like free Wi-Fi, lawn maintenance, or even reduced pet fees. Always compare similar properties in the neighborhood so you have solid reasons for your offer.

  1. Are utilities included when renting a house?

It depends on the landlord and the lease agreement. Some rental houses include utilities like water, trash, or even internet, while others require tenants to pay everything separately. Always confirm before signing—hidden utility bills can make a “cheap” rental much more expensive.

  1. What should I check before signing a lease for a rental house?

Inspect everything! Test water pressure, check for damp or mold, and make sure appliances work. Ask about maintenance responsibilities like lawn care or snow removal. And of course, read the lease carefully—especially clauses about pets, guests, or early termination.

  1. How long are typical house rental agreements?

Most rental agreements are for 12 months, but some landlords offer 6-month or even month-to-month leases. If you need flexibility, ask upfront about shorter terms. Just keep in mind that shorter leases may come with slightly higher rent.

  1. Can I decorate a rented house?

Usually, you’re limited. Many landlords don’t allow painting or drilling holes, but temporary solutions like removable wallpaper, command hooks, and area rugs can transform the space without breaking the rules. Always get written permission if you want to make permanent changes.

  1. Is renting a house better than renting an apartment?

It depends on your lifestyle. Houses usually give you more space, privacy, and outdoor areas, while apartments can be cheaper and easier to maintain. If you’re renting with a family or need extra bedrooms, a house often makes more sense. But if convenience and lower costs are your priority, an apartment might be better.

  1. What happens if I break my lease on a rental house?

Breaking a lease usually means you’ll be responsible for paying rent until the landlord finds a new tenant, or you might lose your deposit. Some leases include an early termination clause with a set fee. Always read the terms carefully and, if needed, negotiate with your landlord—they may be willing to work with you if you communicate early.

Could Zillow or Redfin buy up all the homes — or the whole real estate market?

Could Zillow or Redfin buy up all the homes — or the whole real estate market?

by Real Estate News

Anything can be done online. Some tech companies, like Zillow and Redfin, think they can even buy and sell houses online, and are dreaming of becoming the Amazon of what has come to be known as ‘‘iBuying.” But they’re finding out that buying and selling assets worth hundreds of thousands of dollars is a bit harder as an online industry than buying and selling books.

Last week, Zillow made a startling announcement that it would stop buying homes for the rest of the year, self-reportedly due to a “backlog of renovations and operational capacity constraints” that it blamed on the supply chain issues plaguing the economy.

This news made a splash in the world of iBuying, a relatively new industry in which companies like Zillow, Redfin, OfferUp, and Opendoor allow homeowners to avoid the tedious process of listing and staging homes by selling directly (and quickly) to them. But it also caught traction on TikTok where Sean Gotcher, a Las Vegas real estate agent, posted a video with Zillow’s news laughing at the company’s troubles.

Gotcher had already achieved the sort of brief internet fame one can most easily get on TikTok when he posted a video in September that has now received more than 3 million views. In it, he insinuates that iBuyer companies are manipulating the market by intentionally overpaying for some homes in order to sell others that they’ve already bought in nearby areas for a higher price.

While some of Gotcher’s claims are far-fetched and verge on conspiracy theories (and since real estate agents directly compete with iBuyers, you should take claims either entity makes about the other with a grain of salt), the video went viral because it struck at the heart of a growing fear that housing is becoming less like shelter and more like a risky financial asset traded on Wall Street. This anxiety is not new but has become electrified over the course of the pandemic as a hot housing market and a historic undersupply of housing have locked out young and first-time homebuyers. Earlier this year, fears that BlackRock and other institutional investors were responsible for current market conditions were rampant despite a lack of evidence for the claim.

iBuyer companies make up a very small share of the market — roughly 1 percent of home sales in the second quarter of 2021, at what is their peak so far — but it’s important to take concerns about their growth seriously. While iBuyers contend that they are offering a clear solution to reducing the stress of the home-selling process, US policy has predicated financial security on homeownership, and the introduction of large firms into the space raises fears of potential anti-competitive and predatory behavior.

The Amazon of real estate?

The process of selling a house is stressful, to say the least. On top of the general concern —about getting the best price for the most expensive thing you have ever owned and in which you have likely already invested tens of thousands of dollars and countless hours — is all the logistical stuff. As a part of staging the house, sellers may have to do front yard work, repaint the interior and exterior, replace the carpets, hire a professional photographer for the listing, keep the interior clean in preparation for showings, figure out where to take the home’s dogs and children when there are showings, hire a real estate agent, the list goes on.

This doesn’t even include trying to time your home sale to coincide with the move-in date of your new home or city. Often, people will need to have sold their home in order to buy a new one, which means there can be additional transaction costs there too if you have to put all your things in storage and live at a family member’s place or a rental while you look for your new home.

This is the problem iBuyer companies say they are looking to solve. Instead of having to go through the hassle of this entire process and potentially incur some costs, homeowners can take an iBuyer’s offer — and then the company does the work of staging, listing, and selling the house to someone else.

There are are a couple of ways these companies can turn a profit: first, the difference between what they purchased the home for and what they are able to sell it for (minus any costs for renovations, upkeep, and selling), and second, the fees they charge homeowners to sell the property.

Whether any of them are actually turning a profit is a whole other matter.

iBuyers are growing quickly. According to University of Colorado Boulder’s scholar-in-residence Michael DelPrete, in 2018 iBuyer companies made up roughly 0.2 percent of the market; in 2019, his numbers show that iBuyers accounted for roughly 31,000 purchases or 0.5 percent of the U.S. market. According to research by Zillow, in Q2 of this year iBuyers’ market share reached 1 percent for the first time.

 

 

Two people stand in the side yard of a single-story house and look up at its roof.

 

 

 

 

Employees of Zillow Offers evaluate a home for possible purchase by Zillow in Lauderhill, Florida, in August 2019.
Joe Raedle/Getty Images

 

But according to research by DelPrete, the profit margins in this industry are narrow. Looking at this past quarter, Opendoor and Zillow were posting net losses (-$144 million and -$59 million, respectively). While Offerpad did post a profitable quarter ($9 million), DelPrete notes that “the overwhelming majority of profits are coming from record home price appreciation, which is temporary, and appears to be falling.”

Though these numbers are small in the context of the national housing market, iBuyers have historically been relatively concentrated in specific regions like the Sun Belt where there’s more new single-family construction, since it’s easier to accurately price new, relatively similar homes. In 2019, DelPrete’s research showed that in the largest iBuyer market, Phoenix, they’d reached a 5.5 percent market share. However, Zillow data from Q2 of this year indicates that that number hasn’t shifted much with market share at 5.7 percent in Phoenix. Other cities with a relatively high share include Atlanta (5.3 percent), Charlotte (5.3 percent), and Raleigh (5.0 percent).

Redfin, despite expanding its iBuying business, is still heavily committed to its traditional real estate model. In a statement, Jason Aleem, vice president of RedfinNow (the iBuying arm of Redfin) said: “Part of what makes RedfinNow different is our ability to educate sellers on all of their options in a single conversation. … Many are drawn to the certainty of our competitive cash offers, but those who still want to list on the open market for the lowest fee can do that with a local Redfin agent.”

But are these companies big enough to manipulate the market?

Taking concerns about market manipulation seriously

Despite Gotcher’s TikTok video claims, I’m very skeptical that iBuyers could manipulate the market to systematically undercut homeowners on the initial price of their homes and then set higher prices when they return to the market.

Take the first part of that plan — to systematically buy homes for less than they’re worth. There’s simply too much competition to be able to do that reliably. For one, there are other iBuyer companies that compete against one another. They find themselves in bidding wars with the other companies not infrequently, and some research indicates that the price they’re willing to pay is going up faster than the rest of market. And it’s not just iBuyers competing against one another — there are also thousands of real estate agents who would be happy to sell your home for you.

These companies simply don’t have the power to consistently drive up prices on homes they sell. Let’s break down exactly what would have to happen for an iBuyer to be able to do something like that. First, they would need to buy a significant number of homes within a given market. What a market is is up for debate, but you’d need to get enough market share to shift prices — courts have defined monopoly power as greater than 50 percent. To emphasize how far away iBuyers are from this, in the markets where they are most active that have achieved roughly 5 percent of sales, not even all the homes, just the ones that are selling. And that’s all iBuyers, not one specific company.

But that’s not even the hard part. The hard part would be that they’d need to hold onto the homes until they’d achieved a high enough market share. iBuyers are usually putting houses back on the market in a matter of a few months. They’d need instead to pay upkeep costs, property taxes, and take on the huge risk that all the homes that they are holding onto within a given area don’t tank in value because of something unrelated like an economic downturn or changing living preferences or a hurricane.

This strategy quite evidently has some major downside risks. There’s only so much that even a regionally monopolistic firm would be able to charge before people would choose to live elsewhere.

It would also require that these companies can accurately price homes. Failing to accurately build an algorithm is very costly — Bloomberg reported that when Zillow “tweaked the algorithms that power its home-flipping operation to make higher offers … it had to stop making new offers” after winning too many bids. The market is appreciating more slowly than earlier this year, which means when you take into account the renovation costs and selling costs, Zillow could end up selling those homes at a loss.

It seems as though iBuyers are not resting their business model on selling homes. Instead, as the Wall Street Journal reports, they’ve “been clear that their businesses are built to mostly make money off of ancillary services like mortgage, title insurance and escrow.”

But not all the worries about these firms’ power can be brushed away easily.

To start an iBuying company, you need to be able to raise a lot of money. That means it’s hard for new competitors to join the market. It costs hundreds of millions of dollars in order to be a serious competitor — you have to be able to buy a lot of homes, hire contractors to do the necessary renovations, and also have all of the employees and independent agents to sell the homes as well. That doesn’t even include all the work needed to accurately build an algorithm that prices the homes accurately.

It’s possible that iBuyers could have downstream effects not just on homebuyers, but renters too: They’re not just putting the homes on the market for regular people to buy; they are often selling directly to institutional investors (like private equity firms) instead. According to Desiree Fields, assistant professor at UC Berkeley, there is a “growing role for iBuyers” observed in institutional investor activity in the market. She cites reporting from Business Insider that one CEO expects that up to 20 percent of homes his firm is buying for an institutional investor will come from iBuyers.

While the impact of institutional investors is contested, Fields says that these firms are more likely to pursue eviction than smaller landlords and some even practice predatory “serial eviction filings,” a tactic that disempowers tenants from “reporting problems to their landlords and fosters housing insecurity by adding late fees, attorney fees, and other costs to rent arrears.”

The bottom line: iBuyers are providing a service. It’s not clear they’ve really figured out how to make money. Understanding it as a fledgling industry in need of oversight rather than a behemoth manipulating the housing market is important to understand where the power really lies: in the hands of regulators.

Whether iBuyers end up being an option for homeowners or usher in an institutional investor frenzy that harms renters too is a regulatory question.

First, the underlying reason that home prices have skyrocketed is because of historic undersupply. Experts are clear that issue is largely the result of exclusionary zoning laws that have made it impossible to build sufficient homes to meet demand, and in particular demand for starter homes for first-time homebuyers and lower-income homebuyers. Because there is artificially constrained supply, investors hungry for quickly appreciating assets have turned to the housing market.

Second, lack of protections for low-income tenants was an emergency long before iBuyers or institutional investors ever became a presence in the American housing market. While this past year has pushed governments to be more willing to enact tenant protection measures like eviction moratoria and rent relief, tenants often lack basic protections from landlords who openly flout even the few laws that are enacted, due to lack of consistent enforcement.

People aren’t irrational to fear what increased investor activity in housing could mean. But it’s important to accurately diagnose what’s going on here and the actual range of potential harms. If not, the policy solutions designed by the government could fail to protect the people who need it the most.

AI Won’t Spell The End Of Real Estate Agents. A Court Decision Will

AI Won’t Spell The End Of Real Estate Agents. A Court Decision Will

by Real Estate News

While many agents fear the replacement potential of AI, it may end up allowing the industry to continue working if the worst happens.

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A growing threat looms on the horizon, shaking the real estate industry to its very core. Inevitable changes seem to be coming sooner than later. 

Is this a worst-case scenario? Perhaps. Is there enough truth and data to be plausible? Yup. I believe reality lies somewhere in the middle of our risk spectrum — and no, the real threat is not AI.

An exemption problem

There’s a legal battle (based on several cases, actually) that’s been brewing for years in court. The TL;DR — Real estate agents are currently 1099/independent contractors and not W2 employees. Many in leadership believe that will change when the government forces Realtors to become W2 employees.

Currently, the industry has been riding on an “exemption” for the classification of the industry, brought about by the mighty and long-lasting power of the National Association of Realtors (NAR) lobby in Washington, which is second only to the NRA in size. (Good work, Team RPAC.)

Cutting costs (Read: Agent and staff reductions)

Not all Realtors are 1099, but about 87 percent (according to NAR’s 2021 data) are independent contractors. When the government “asks” that the designation change to W2, agents will have to be paid minimum wage. Federal minimum wage is currently $7.25 per hour or $15,000 per year.

However, most believe that due to a number of factors this will increase significantly soon. So consider the living wage for the sake of this discussion since few of us in the industry could (or would) live on the minimum wage of $15,000 per year.

According to Just Capital and MIT, “For one full-time working adult with no children in 2022, the national average living wage is $17.46 per hour – or $36,311 annually.”

In this livable wage future, each agent would be paid by the broker a base rate of $36,000  per year. Friends, there is no 1099 brokerage that will keep all its agents if this happens. The cost is simply too great. 

Agents vs. math

What would it take for an agent to keep their job at a brokerage? How many transactions would be acceptable?

Using national averages according to Zillow, the average home value is $329,000 as of this writing. The average total sales commission for both buyer and seller sides of the transaction is 5.37 percent. Divided by two, that equals 2.68 percent per sale ($8817.20 per side). Based on this math, the average agent needs to sell five transaction sides per year to pass break-even for the cost of the base.

Assuming the industry is in business for profit, in my estimation, agents would need to do around 12 transaction sides per year on average to remain employed. Making matters more difficult, with a hovering recession, we are not in a 2021 boom economy, either. 

There are too many agents. The number of agents exploded nationwide in the last two years. Estimates are that there are currently over two million licensed real estate agents in the US and that there will be roughly 4.5 million housing transactions — thus, 2.25 transactions per agent “available” with this number of agents.

The imbalance in the number of agents and lack of proceeds to support so many agents will create massive layoffs of crummy agents who entered the market during the boom and don’t have the necessary skills to survive these conditions. Even middle-of-the-road producers who are content selling six homes a year will be removed from office.

The new problem will be staffing desks and phones and getting repetitive tasks done that were previously taken care of by entry-level 1099 agents. 

The AI answer

Real estate brands, teams and brokers will have to reduce costs and will inevitably turn to real estate AI to do more of the tedious, monotonous work, just as they have with VAs (virtual assistants). In addition, the easy lead qualifying and simple Q and A solutions are a far more dependable, accurate and inexpensive alternative to 1099 desk, chat and phone staff. 

The huge industry trade shows (if they still exist) will be jammed with new, untested AI tools that promise to be the all-in-one printer. Caveat emptor: Failure is always an option, but ChatGPT has a winning model on their hands. 

For example, I asked ChatGPT the type of question an entry-level Realtor might be asked: “Will I need a septic tank inspection before selling my house?” Here is its very on-point and scarily impressive answer. Chat GPT gave me good advice.

The end will be swift

AI may be viewed as the executioner; however, in this case, it’s likely that a judge will mean the death of hundreds of thousands of real estate agents’ jobs. With the stroke of a pen and the bang of a gavel, the end of the 1099 exemption for Realtors will signal a new era in real estate.

There are a few companies today, such as Redfin, that are already built for this model and will likely thrive during the transition. However, the bulk of today’s massive brokerages like eXp, Keller WIlliams and RE/MAX will be forced to legally comply or die. 

Companies like to make money. So that they won’t die, they will pivot and look for the most cost-effective method to continue making money. That solution has been handed to them in the form of ChatGPT and other AI to help them survive and become vastly more efficient in the future.

Chris Drayer is co-founder of Revaluate which segments consumers for marketers by propensity to move.

This real estate developer is happy that new home construction is falling

This real estate developer is happy that new home construction is falling

by Real Estate News

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


New York
CNN
 — 

Recent headlines point to a slumping US housing market — as mortgage rates average near 7{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}, an increasing number of potential homebuyers are finding it difficult to finance homes.

Mortgage applications fell in late February to a 28-year low, according to the Mortgage Bankers Association. But some of the country’s largest homebuilders are undeterred.

David O’Reilly, CEO of the real estate developer Howard Hughes Corp., told CNN that he’s “cautiously optimistic” that the residential housing market is rebounding after a downturn in the second half of 2022.

Before the Bell spoke with O’Reilly about Howard Hughes Corp

(HHC). and his outlook for the market.

This interview has been edited for clarity.

Recent data point to doom and gloom for the housing market. What are you seeing?

O’Reilly: I hear the headlines and they generate a lot of clicks, but I don’t see the death and destruction or anything close to what we saw during the global financial crisis. This, in my estimation, will be a very modest downturn. First, as a country, we’re short between four and five million homes. We just haven’t built enough to keep up with household formation since the global financial crisis. In most markets, we’re close to record lows in terms of inventory for homebuilders.

Sure, home prices are down but we’re just giving back some of the gains we saw in 2020. We’re still making an outsized profit relative to historical norms. When you hear about homebuilders buying down mortgage rates [contributing part of the purchase price upfront], they’re doing the things that they should do to help move inventory and they’re doing it very profitably.

David O' Reilly, CEO of the real estate developer Howard Hughes Corp. This real estate developer is happy that new home construction is falling.

Are you having issues attracting new buyers because of higher mortgage rates?

The mortgage rate is less impactful to homebuyers than the volatility of interest rates.

When interest rates are moving, rising or falling quickly, they create a pause amongst buyers because they want to know where it settles out. No one wants to lock in if they think the mortgage could be cheaper in a month. I think homebuilders have, to a large extent over the past several months, tried to take some of the volatility out of the market. Some of the volatility has come out naturally as the rate increases have been consistent with expectations and mortgage rates have behaved normally, but some of the risk and uncertainty has been taken out because home builders are saying we’re gonna lock in your rate at, you know, 4.99{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} or 5{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}, for a year or two.

Even though that 5{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} rate is much higher than the 3{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} rate a couple of years ago, it gives the consumer confidence to act without the uncertainty of rate volatility.

Are we in a housing recession?

In the second half of 2022 we saw a meaningful downturn in home sales nationally. We saw meaningful reductions across the board. But I’m cautiously optimistic that we’re starting to see a turn. I find it encouraging that home sales for the past several months have increased.

But what about new housing starts? Construction is falling.

New housing starts continue to fall — to me, that’s great news. During the second half of 2022 we saw the cancellation rate on new home sales surge. Those cancellations left a lot of standing inventory — home builders with homes that they were building for someone that canceled sitting on them.

The fact that they’re selling more but building less tells me that they’re eating through that inventory. And that is a great sign for the rest of this year.

▸ It’s all about the labor market this week as a slew of jobs data for February is set to be released.

Last month’s massive surprise — 517,000 jobs were added to the US economy when economists were expecting 185,000 — sent the stock market reeling. Investors are hoping that numbers fall back down to earth to help cool the economy and inflation along with it. If they don’t, expect market swings as the Fed will face more pressure to hike interest rates to keep prices in check.

ADP’s private payroll report for February and the JOLTS job openings, hires and quits report for January are expected Wednesday. On Thursday, Challenger, Gray & Christmas is set to release its job cuts numbers for February, and Friday brings the main show — the US jobs report for February.

Analysts expect that the economy added 200,000 jobs in February and the unemployment rate is expected to remain at a historically low 3.4{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}.

▸ Speaking of the Fed, Chairman Jerome Powell will be on the hot seat this week as he testifies before the Senate on Tuesday and the House of Representatives on Wednesday. In his semi-annual report to lawmakers, Powell will likely stress that the Fed will need to take more action to get inflation back down to its 2{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} target. Investors will watch lawmakers question Powell, and he’ll likely be asked to defend his fight to cool the economy, which could hurt wage growth.

▸ President Joe Biden is also expected to unveil his Federal budget proposal for the next year. He’s promised that it will include tax hikes for the wealthy — something that Wall Street typically doesn’t like to hear. While the president’s budget proposal is just that — a proposal — it will likely guide Democratic policy initiatives for the year to come. That means we’ll likely hear more about increasing capital gains taxes and taxes on controversial corporate stock buybacks, two policy proposals that also rattle investors.

Amazon made two recent announcements that don’t sound very good for the company — at least at face value.

The company is pausing construction on its second headquarters in northern Virginia, the company confirmed in a statement to CNN on Friday. Bloomberg first reported news of the pause.

John Schoettler, Amazon’s real estate chief, said the company is pushing back the new headquarters’ second-phase groundbreaking. The first phase is still under construction and expected to open in June.

The company’s decision to pause construction comes just two months after Amazon CEO Andy Jassy confirmed the company would be eliminating more than 18,000 jobs, the largest cut in its history. Amazon hired rapidly in the early years of the pandemic and it is cutting costs as consumers shift their behavior.

But Wall Street applauded the news on Friday. Amazon

(AMZN) stock surged 3{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} higher.

That’s because investors want the company to reduce its expenses as revenue slows and the economic forecast remains dour. Jassy said during Amazon’s fourth quarter earnings report that he plans to do just that.

Amazon also announced on Friday that it will close eight cashier-less brick and mortar stores in Seattle, New York and San Francisco.

The Real Estate Market Has Officially Closed on Opendoor

The Real Estate Market Has Officially Closed on Opendoor

by Real Estate News

The COVID-19 pandemic delivered a generational catalyst for the U.S. housing sector. Median dwelling prices soared over 40{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} in significantly less than two yrs as document-low fascination prices drove the price of financing a home to new lows and work-from-any place guidelines permitted extra younger adults to transfer absent from downtown city areas. Now home loan premiums are soaring, creating housing charges to stagnate and even decrease in many regions around the region.

A person business experience the brunt of this slowdown is Opendoor (Open -3.92{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}), an online property flipper. The firm’s gain margins are deteriorating owing to declining house rates and weak acquisition choices more than the very last couple many years, causing traders to get particularly pessimistic about its future prospects. Here’s why the worst is yet to occur from this disaster of a serious estate disrupter.  

Q4 earnings: From negative to worse

Opendoor’s Q4 2022 earnings ended up ugly.  Profits declined 25{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} 12 months around 12 months to $2.86 billion, with gross margins sliding from 7.1{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} to 2.5{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}. That gave Opendoor a whopping $71 million in gross income final quarter, which wasn’t even plenty of to address the $113 million in fascination charges from the credit card debt it works by using to finance residence buys.

And it is not as if the organization is frugal with its running bills. Opendoor invested $194 million on gross sales/internet marketing, $23 million on corporate fees, and $48 million on know-how/merchandise enhancement fees in the fourth quarter. Insert it all up, and Opendoor posted a internet loss of $399 million just in Q4. For all of 2022, the enterprise misplaced $1.35 billion though creating only $667 million in gross gain. 

A bad organization strategy

Opendoor requires to scale its gross financial gain to substantially bigger heights in get to turn web revenue positive. For a residence flipper, there is a rather very simple system for creating this happen: Provide your housing inventory for extra than you acquired it for, net of funding fees. This is an effortless undertaking when property selling prices are soaring and the Federal Reserve has fascination charges at zero. It is a great deal much more challenging when curiosity prices start off climbing at the speediest pace in history, rising your curiosity expenses and making housing affordability the worst it has at any time been for people, such as the peak of the 2006 housing bubble. To simplify it, home flippers are tied to the housing market, placing it at the mercy of macroeconomic factors and the Federal Reserve.

Introducing on to these woes, it would seem Opendoor is basically very bad at house flipping. For illustration, in August of 2022 it is believed that the corporation missing dollars on 42{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of its transactions. This was in the third quarter of final calendar year, when the median property value in the United States was nonetheless rising. In Q4 of 2022, housing rates went into a slight drop, leading to Opendoor’s gross margin deterioration. If house prices stagnate further more or even go into a cyclical downturn for an extended period, Opendoor is likely to be in a globe of harm fiscally.

Wherever does the firm go from right here?

Opendoor needs to look by itself in the mirror and comprehend it is managing on a flawed business product. Flipping households as an online market still indicates acquiring physical property financed with financial debt, possessing them sit on your harmony sheet, and (with any luck ,) advertising them at a better selling price a handful of months later on.

The only route forward for Opendoor is to pivot its company product. It has over $1 billion in cash on its stability sheet and $4.5 billion in property stock it can liquidate. At a industry cap of below $1 billion, it would not have to create a gigantic new business in order to get started developing benefit for shareholders. But if it carries on down this household-flipping path in an economy with declining residence values, it will only continue on to damage shareholder worth.

Brett Schafer has no position in any of the stocks outlined. The Motley Fool has positions in and suggests Opendoor Technologies. The Motley Idiot has a disclosure plan.

Commercial real estate continues to get pummeled

Commercial real estate continues to get pummeled

by Real Estate News

Industrial serious estate continued to acquire it on the chin previous 7 days, and brokerages are preparing for even rougher instances ahead. 

CBRE, JLL, Colliers and Cushman Wakefield, among others, are shifting forward with value-cutting steps, which includes layoffs as house gross sales and leasing consume into their earnings.

Symbolic of the rough situations, the iconic — but vacant — Flatiron Creating is heading to auction scheduled by a New York state judge for March 22. 

Sorgente Group, Jeffrey Gural’s GFP Genuine Estate and Abdominal muscles Serious Estate Associates, which owns 75 p.c of the constructing at 175 Fifth Avenue, sued in 2021 to seek a partition sale just after the entrepreneurs stated they could not see eye to eye with the 25 per cent proprietor, Nathan Silverstein. The choose issued an get in January permitting the sale to go ahead. 

It is not the only significant-increase perhaps poised to strike auction. A subsidiary of M&T Lender asked a court docket to approve the foreclosure on 29 West 35th Avenue so it can market the making at auction. The lender received two judgments towards entrepreneurs Paul Sohayegh and Roni Movahedia in December over their default on a $41 million bank loan.

The Brooklyn business market seems to be similarly bleak. When the vacancy amount held at about 21 per cent in 2022, web absorption in the fourth quarter crashed from all-around 279,500 sq. toes in 2021, down to 950 sq. ft at the shut of 2022 (while which is a important improvement from the third quarter). 

Meanwhile, in Queens, for the 2nd time in 3 months, the Chetrit Team — squeezed by occupancy struggles and a floating fee loan manufactured costly by the Fed’s amount will increase — fell driving on a $225 million financial loan covering 640 multifamily models in Jamaica. That mortgage comes due in July.

In further evidence of professional distress in Los Angeles, Laguna Place Attributes is delinquent on a $329 million bank loan it utilised to acquire a portfolio of a lot more than 1,000 L.A. residences significantly less than a 12 months after securing the financial debt. 

In addition, Grant King is viewing his share of tricky moments, as Pertinent Team, which he co-launched, lost the Tommie and Thompson inns to mezzanine loan providers by means of foreclosures.

Somewhere else, LaSalle Financial investment Administration marketed the office environment creating at 4 Hutton Centre Drive in Orange County for 55 percent fewer ($24.9 million) than what the company acquired it for in 2019 ($55.4 million).

In San Francisco, the Chronicle claimed the city has misplaced approximately 150,000 every day place of work personnel considering the fact that the commence of the pandemic in early 2020 throughout a change to remote get the job done and on line procuring.

Not every person is emotion the pinch similarly. The Chicago space retained its No. 1 place (for the 10th calendar year managing) as the nation’s foremost metropolis for professional real estate investment decision. This despite getting rid of Boeing, Citadel and Caterpillar headquarters to other municipalities. 

Texas, in the meantime, noticed commercial development jobs overall $70 billion — or 20 per cent of the business genuine estate investing in the country — last year,  the Dallas Early morning Information claimed, based mostly on an annual analyze by the Nationwide Affiliation of Industrial and Place of work Parks. 

Hitting dwelling

The professional sector isn’t the only one having blows. Big household brokerages, which includes Any place, Refin and Compass, reported huge losses. Previous week, Compass declared it posted a $158 million loss in the fourth quarter of 2022, main some analysts to doubt that the firm will split even by 2025. 

South Florida — as a consequence of the lethal Surfside rental collapse — is seeing spiking insurance policies charges and much less insurers crafting insurance policies, which could guide to apartment owners selling their models at substantial bargains. 

If we’re hunting for some good news, the Manhattan and Brooklyn housing marketplaces observed an uptick in action that was over and above seasonal. Continue to, even there, the information was coated in 2023 truth.

“This is the calendar year of disappointment,” stated Miller Samuel CEO Jonathan Miller. “Sellers are not likely to get their selling price of 2021 and customers are not going to see substantial charge price savings.”

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