Houston among top 5 cities in housing investment activity, according to report

To anyone paying attention, it’s no secret that Houston is a top market for real estate investment. A new report by real estate brokerage New Western says the Bayou City is seeing among the strongest growth in residential real estate investment this year.

In Houston, investment grew by 46% from the first to the second quarter, according to the report, titled “The Flip Side 2.0: An Outlook for Residential Real Estate Investing in 2023.” Houston ranks behind only Boston (88%); Washington, D.C. (50%); Charlotte, North Carolina (49%); and Jacksonville, Florida (48%).

Those numbers are based on a survey New Western conducted in June among 1,358 real estate investors who have purchased properties through the company’s marketplace.

Sara Friede, general manager at New Western’s offices in Houston and The Woodlands, attributes Houston’s ranking to its strong population growth.

“People are moving here, and they need places to live,” she said. “And that’s where we come into play.”

The increase in real estate investment is happening at the same time as home sales continue to decline year over year. May was the 14th consecutive month of such decline in Greater Houston, according to the Houston Association of Realtors, with sales down 10.4% from May 2022.

While housing inventory is improving, it remains low at a 2.8-month supply — meaning it would take that long to sell all homes now on the market at the current pace of sales. A 4- to 6-month supply is considered a balanced market.

Although real estate investors are equally affected by high interest rates, they are benefiting from the slowdown and tight market.

“Investors are looking at this market as an opportunity to create more affordable homes to the market since we are kind of in this shortage,” Friede said.

By scooping up vacant or foreclosed homes, renovating them and putting them back on the market, investors may help middle-income buyers.

According to New Western, the median home price for flipped homes is $180,113 in Houston, compared to $340,095 for all homes sold by Realtors in the region in May, according to HAR.

Meanwhile, some local investors are feeling the influx of new investment in the city.

Sonia Medrano entered the Houston real estate market in 2020, at the height of the pandemic. That first year, she purchased and flipped seven houses under her company, Trusted Partners Inc., she said. She has grown her business every year since, adding commercial and multifamily properties as well as vacant land.

For this year, she estimates she will flip 20 to 25 properties. However, only a fraction will be in the Houston region.

“Here in Houston, we have a lot of investors,” including from states like New York and California, she said. “We get so many deals … in San Antonio in this moment — more than Houston.”

Friede isn’t worried that increased competition is making it harder for individual Houston real estate investors to find properties to flip. New Western’s investors are finding between 70 and 80 distressed homes a month here, she said.

“Is it competitive? Yes,” she said. “But you’re going to find that in any market, and there are plenty of homes available … that we’re bringing in every month. There’s an opportunity for everybody here.”

Looking ahead, Friede doesn’t expect the growth in real estate investment and flipping to slow down, as housing inventory remains low and homebuilders struggle to keep up with demand.

 

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