Real estate investors are buying up homes, and first-time buyers increasingly are finding themselves up against them in bidding wars.

Investors are drawn to real estate to flip single-family homes, townhomes, and condos for a profit and to build their portfolio of properties to convert them to rental units.

The share of investors is at the highest level since 2015, according to realtor.com®’s data. They’re most notably targeting the Midwest and Sun Belt, where rental prices are climbing but home prices still remain relatively affordable compared with some other regions of the U.S., realtor.com® says.

“Investors are particularly attracted to affordably priced homes, the very homes that would normally be appealing to first-time buyers,” says George Ratiu, realtor.com®’s manager of economic research. “Investors who generally come with cash have a significant advantage over first-timers who typically rely on a mortgage. In a market with few homes for sale already, this prices out many buyers.”

Realtor.com®’s research team identified where investors are purchasing the highest share of homes by evaluating thousands of deed records in the nation’s 50 largest metro areas. They looked at single-family homes, condos, and townhomes that were purchased by investor entities. Individual investors—mom and pops purchasing a unit to rent—were not included in the analysis. For geographic diversity, the team also limited its list to one metro per state.

The following areas are where investors are purchasing the highest share of homes, according to realtor.com®.

Memphis, Tenn.

• Share of investor buyers in July: 17%
• Median list price in September: $249,000
• Median rent in September: $1,217

Birmingham, Ala.

• Share of investor buyers: 16%
• Median list price: $271,000
• Median rent: $1,115

St. Louis

• Share of investor buyers: 14%
• Median list price: $250,000
• Median rent: $1,150

Charlotte, N.C.

• Share of investor buyers: 13%
• Median list price: $390,000
• Median rent: $1,543

Jacksonville, Fla.

• Share of investor buyers: 13%
• Median list price: $370,000
• Median rent: $1,446

©National Association of REALTORS®
Reprinted with permission

A record number of home builders are reporting a shortage of workers such as carpenters, painters, and electricians, the National Association of Home Builders reports. The shortages come at a time when demand is increasing for new homes. Builders are struggling to meet demand and faced with both surging prices for materials and shortages of lots.

The share of builders reporting a shortage of labor reached a record high of 76% in October, well above the previous peak of 67% that was set at the end of the 1990s, the NAHB reports. The latest percentage is also much higher than the 45% reached during the housing boom in the mid-2000s when the industry needed to find enough labor to build 2 million homes a year to meet demand, the NAHB reports.

More than 55% of single-family builders reported a shortage for each of 16 trades crucial in building a home. More than 80% of builders reported a shortage of labor for carpenters (rough, finished, and framing crews), the survey shows.

At a time when home improvement demand is surging, remodelers also are reporting extreme labor shortages. More than 55% of remodelers reported a shortage in all the same 16 trades.

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Single-family housing starts dropped in October as supply chain woes over construction materials and labor shortages continued to hamper the building industry. Single-family housing starts fell nearly 4% last month to a seasonally adjusted annual rate of 1.04 million, the U.S. Department of Housing and Urban Development and the U.S. Census Bureau reported Wednesday.

Still, single-family housing starts are faring better in the long run, up 16.7% year-to-date.

“The rising count of homes permitted but that have not yet started construction is a stark reminder to policymakers to fix the supply chain so that builders can access a steady source of lumber and other building materials to keep projects moving forward,” says Chuck Fowke, chairman of the National Association of Home Builders.

Builders blame supply chain effects as the reason 152,000 single-family homes that have been authorized but have not yet started, up 43.4% from a year ago.A record number of home builders are reporting a shortage of workers, including carpenters, painters, electricians, and other trades.

“Single-family permit data has been roughly flat on a seasonally adjusted basis since June due to higher development and construction costs,” says Robert Dietz, the NAHB’s chief economist. “Demand remains solid but housing affordability is likely to decline in 2022 with rising interest rates.”

Overall housing starts, which include both single-family homes and multifamily construction, decreased 0.7% in October to a seasonally adjusted annual rate of 1.52 million units. The multifamily sector, which includes apartment buildings and condos, rose 7.1% in October, reaching an annualized pace of 481,000 units.

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Investors are seeing early benefits to their opportunity zone investments: Median single-family and condo prices are increasing in the majority of nationwide opportunity zones—by 62%, according to a third-quarter report released by ATTOM Data Solutions. Prices increased by at least 20% annually in nearly half of the zones.

Opportunity zones, established by Congress in the Tax Cuts and Jobs Act of 2017, were created to help revitalize low-income areas, offering investors significant tax breaks over several years to those who do so. More than 8,700 communities across the country have been designated as available for revitalization using opportunity zones.

ATTOM Data Solutions identified 10 opportunity zones that nearly doubled in year-over-year increases in median home prices and saw prices increase above the national median of $310,500. They are:

1. Hennepin County, Minn. (270530095000): up from $169,971 in Q3 2020 to $337,225 in Q3 2021
2. Galveston County, Texas (48167724101): up from $315,000 in Q3 2020 to $621,323 in Q3 2021
3. Miami-Dade County, Fla. (12086002201): up from $414,000 in Q3 2020 to $815,000 in Q3 2021
4. Whatcom County, Wash. (53073001000): up from $283,500 in Q3 2020 to $557,000 in Q3 2021
5. Contra Costa County, Calif. (06013337200): up from $383,500 in Q3 2020 to $741,000 in Q3 2021
6. Adams County, Colo. (08001015000): up from $222,500 in Q3 2020 to $429,900 in Q3 2021
7. Belknap County, N.H. (33001966000): up from $209,500 in Q3 2020 to $400,000 in Q3 2021
8. San Diego County, Calif. (06073003404): up from $335,000 in Q3 2020 to $639,500 in Q3 2021
9. Sarasota County, Fla. (12115000200): up from $215,000 in Q3 2020 to $410,000 in Q3 2021
10. Hillsborough County, Fla. (12057004200): up from $294,500 in Q3 2020 to $560,000 in Q3 2021

©National Association of REALTORS®
Reprinted with permission

With surging home prices, more home buyers are showing an interest in manufactured housing. Even buyers who aren’t specifically looking for manufactured homes may discover that some listings they are interested in feature them, since they more closely resemble site-built homes nowadays.

The manufactured housing segment has long contended with a reputation of being poorly made or cheap. Companies say the latest designs are modern and often energy-efficient and are built to withstand even the most severe weather.

Manufactured homes are built in a factory and then assembled onsite. This allows homes to be built faster and cheaper.

Some builders and developers hope that home buyers who may be locked out of homeownership may consider manufactured housing as an option. Also, lenders and developers are showing more interest in manufactured housing, believing it could help with housing inventory and affordability challenges.

“We have a lot of teachers, first-time home buyers, and folks downsizing after retirement,” Dustin Arp, managing partner of Spark Homes LLC, which has developed manufactured home communities, told The Wall Street Journal. “Maybe they used to qualify for site-built housing but no longer do.”

A new single-family built on site sold for about $392,000, on average, in 2020; subtracting the cost of the land, the house itself cost about $309,000, The Wall Street Journal reports, citing government data. For comparison, new manufactured homes cost $87,000, excluding the land.

More than 100,000 new manufactured homes are to be built this year, the highest amount since 2006, according to U.S. Census Bureau data.

But the sector may still need to convince buyers about manufactured housing as a cost-effective alternative. The homes are often sold by dealerships. They may offer limited financing options. “In those cases, a person might buy a manufactured house as a piece of personal property, like a car, rather than getting a mortgage that tethers the house to underlying land,” according to The Wall Street Journal.

Further, about 42% of manufactured homes are purchased with loans secured by the home. Those purchases do not include the plot of land, according to the Consumer Financial Protection Bureau. The loans could come with higher interest rates, and owners may be at greater risk of losing their homes if they don’t own the land as well, The Journal says.

Recently, Fannie Mae and Freddie Mac have adopted new programs to make it easier for lenders to extend conventional mortgages on certain manufactured homes, including those that have features like porches or garages built on site.

©National Association of REALTORS®
Reprinted with permission

You may be watching your cash flow during the market slowdown. Use these smart tips to protect your nest egg.

News about economic tumult may be making you feel jittery about your finances. A “housing recession,” as National Association of REALTORS® Chief Economist Lawrence Yun characterizes the current market slowdown, may be daunting for real estate pros whose commission checks can vary greatly with the ebbs and flows of the real estate cycle.

After all, 37% of agents last November said they were struggling to pay rent for their offices, according to a poll(link is external) by Alignable, an online network for small business owners. Real estate professionals, along with other American workers, may not be feeling particularly rich: About six in 10 consumers say they are living paycheck to paycheck—about 45% of whom earn more than $100,000 per year—according to a late November poll from PYMNTS and LendingClub. Further, consider that the median gross income of REALTORS® was $54,330 in 2021, and incomes tend to grow with more years of experience, according to NAR data.

To weather potential business hiccups, financial experts offer 10 money-saving tips:

1. Beef up your reserves. A reserve account consists of savings to cover any unforeseen expenses, which can be crucial during tough financial periods. For the self-employed, a good rule of thumb is to put enough savings to cover six months of expenses into a cash or stable value-type account, advises Brian Wiley, founder of Tree City Advisors(link is external) in Boise, Idaho, and host of “The Real Money Pros” radio show. 
2. Revisit your spending habits. Scrutinize your expenses to find ways to reduce or eliminate excess. “This is a good practice in any economy, but it’s even more important when cashflow is limited,” Wiley says. “You might be surprised how much you can save by eliminating extra television services, daily lattes and memberships.” Pay special attention to items like your car or homeowner’s insurance: Drivers who comparison shop on auto insurance, for example, can save an average of $1,127 a year, according to a study from CarInsurance.com. Michael Soon Lee, CRS, GRI, associate broker at Realty ONE Group Future in Dublin, Calif., advised in a Center for REALTOR® Financial wellness webinar to cut at least $1,000 a month in personal expenses, particularly if you lack three or six months’ worth of savings. Cut back on non-critical spending, such as dining out, gym memberships, coffee shop visits and cable TV, and find more ways to save at sites like AmericaSaves.org(link is external), he suggests. 
3. Re-evaluate where you’re investing money. Assess the value of all your accounts like checking, savings, investments, retirement, etc. “Each of these may become critical resources and should be prepared ahead of a need,” Wiley says. “The best practice is to have any money, which might be needed in the next three years, set aside as a ‘cash-like’ investment, such as a CD, money market or short-term government bond.” On the other hand, stocks are often volatile in an economic slowdown and often require a more long-term growth strategy. So, if you have an important savings goal to fund within a year, choose a more stable investment, like CDs or bonds. “Be sure risk investments are purposeful and are given the amount of time needed to recover before the value is needed,” Wiley notes. 
4. Get smarter about taxes. Work with a qualified tax adviser to ensure you’ve taken advantage of every tax-reducing method available to you and that your business is structured appropriately, Wiley suggests. For example, how much of your income should be designated as W-2 pay (self-employment income)? In some cases, the answer may be all of it, Wiley says. “But in many other cases, the answer is some of it, which leaves the balance to be distributed as a dividend if you are filing as an S-Corporation,” he adds. “This type of strategy could save you lots of tax dollars.” Wiley says the top financial mistake real estate professionals make is not saving enough for taxes and missing out on savings. “If you do not have a good tax plan, then you are likely paying much more in taxes than necessary,” he says. “I have seen many cases where independent contractors pay 50% more in taxes than they should.” 
5. Create a budget. You’ve heard it before, but now is a good time to have a budget. Too often, “many people discount the concept of making a budget until they find themselves living in lean times,” Wiley says. “It is always better to be prepared—and trained—before you need to adhere to a tight budget.” Have a personal and business budget that estimates your earnings and expenses and breaks down a full list, item by item, of regular expenses. Track how you do and modify when needed. Need help creating one? The Center for REALTOR® Financial Wellness(link is external) includes budgeting tips and spreadsheets to help. Sites like Mint.com(link is external) or your bank, credit union or credit card company likely offer budgeting tools as well, Wiley says. 
6. Open specialized savings accounts. To help stay on budget, financial experts recommend opening multiple, individual savings accounts. For example, pool funds into multiple accounts labeled for emergency/reserves, taxes, retirement and business expenses. Ryan Serhant, CEO of Serhant and equity holder in RLTY Capital, offers tips to independent contractors on financial health. Since the beginning of his real estate career, he has allocated commission checks to separate banking accounts, particularly for taxes, to avoid spending commission money he doesn’t really have. His general rule of thumb: Save one-third of each paycheck for taxes and one-third for living expenses; the rest can go to savings. 
7. Keep on investing. No matter the market, it’s always smart to continue investing, Wiley says. He recommends a dollar-cost averaging strategy—the practice of investing a fixed dollar amount on a regular basis. In a sluggish market, the lower prices on investments can serve as an advantage in that they likely will increase over time. Also, investing even a little amount could make a significant difference over the long haul. For example, the Acorns(link is external) app automatically rounds up the price on everyday purchases to the nearest dollar and then places the excess into an investment portfolio. So, if you buy a donut for $2.30, Acorns rounds that to $3 and invests the 70-cent difference on your behalf. Daily spare change like that could amount to $900 per year in investments. 
8. Consider a side hustle. If you’re especially tight on money, consider a side hustle to supplement your income and leverage your skillsets in other ways. Lee suggests generating extra funds by serving as a notary (which could offer $75 to $200 per appointment), home stager, appraiser or property manager. However, understand that you also likely will need to get extra training or licenses to do many of these jobs. To find opportunities, Lee cites websites like SideHustleNation.com(link is external) or Upwork.com(link is external), which connect professionals to businesses who are seeking specialized services. 
9. Bank on the future. Retirement savings are often one of the first expenses people nix when finances get lean. Wiley, who hosted a webinar for the Center for REALTOR® Financial Wellness in January called “How Inflation and Market Volatility May Impact Your Plans for Retirement,” says there are many strategies for independent contractors to save for their post-career future. He suggests setting aside at least 10% of gross income for retirement. If you haven’t been doing that, you can still catch up. Most real estate professionals have their biggest earning years in the latter third of their career, he says. This still “presents a great opportunity to save more of their income for retirement and to use the many tax advantages offered to ‘late savers,’ such as catch-up contribution limits in 401(k)s, IRAs and ROTH IRAs,” he adds. “Saving more in these types of retirement plans will not only help the professional have a larger nest egg but will likely also reduce taxes along the way. Consider it more of a ‘snowball’ effect.” Wiley also says ROTH conversions during lower income years could serve as another retirement savings tool. 
10. Find extra guidance. Financial advisers and tax planners can help you identify ways to meet your savings goals and expand your financial safety nets. Also, sites like financialwellness.realtor(link is external), an educational resource for real estate professionals provided by NAR, offers personalized financial planning goals, budgeting tips, tax and retirement planning, and ongoing webinars on various topics. “Get help from an investment professional if you need guidance, and always be sure to only hire an adviser who will work in your best fiduciary interests,” Wiley says.

©National Association of REALTORS®
Reprinted with permission