What is Working In Today's Real Estate Market

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What is Working In Today's Real Estate Market

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What is Working In Today's Real Estate Market Podcast Transcript Hello everyone, and welcome to the Investing in Real Estate Show. I'm your host, Lex Levinrad. In today's episode, I want to discuss two important topics: first, whether we are heading into a new foreclosure crisis, and second, what strategies are currently working for real estate investors in today's market. Let's begin by discussing the overall state of the market and whether we are moving toward a foreclosure crisis. There are several ways to look at this. If you compare today's data to the peak levels seen in 2008—particularly foreclosure numbers and MLS inventory—you could argue that the market is still in relatively good shape. That assessment would be accurate. However, when you examine year-over-year trends, a different picture emerges. Foreclosures have increased significantly, bank-owned properties are up year over year, and MLS inventory has risen substantially. For example, in our local South Florida MLS, there were approximately 15,000 properties for sale in 2022. That number doubled to 30,000 in 2023, increased again to about 45,000 in 2024, and has now reached nearly 60,000 listings. While these numbers are not yet comparable to the levels seen during the 2008–2009 crisis, the market has clearly shifted. We are now in a buyer's market, and sellers are facing increased challenges. There are, of course, exceptions. Certain luxury markets—particularly waterfront properties or ultra-high-end neighborhoods such as Lighthouse Point or Boca Raton—remain relatively unaffected. High-net-worth buyers are generally less sensitive to interest rates and economic fluctuations. However, affordability remains a major issue for the average household, especially in South Florida, where median home prices are often beyond what the typical U.S. income can comfortably support. When you look beyond South Florida and examine markets across the Midwest and other regions of the country, affordability pressures become even more apparent. Florida, in particular, tends to behave as a boom-and-bust market, unlike more stable markets such as Cleveland, where price swings are typically less dramatic. Markets such as Austin, parts of Nevada, Arizona, and Florida have experienced sharper corrections, especially in areas like Southwest Florida, including Cape Coral and Naples. Currently, the situation is widely described as a housing crisis rather than a financial crisis. However, it is possible that financial impacts could increase over time if mortgage defaults and foreclosures continue to rise. Banks may respond by tightening lending standards, particularly institutions that originated large volumes of loans at peak prices or that hold depreciated bond portfolios. From my perspective, what I am seeing on the ground—particularly in what I refer to as "middle America" markets—is a growing shift toward affordability-driven investing. My focus has historically been on affordable markets within Florida and other regions where housing costs align more closely with rental demand and average incomes. Early in my career, while living in Boca Raton, I began purchasing properties further north in areas like Port St. Lucie, where homes were significantly less expensive. As prices increased there, I moved further north again into markets such as Fort Pierce, where properties were even more affordable. These purchases generated strong cash flow despite being located in lower-income neighborhoods, because acquisition prices were low relative to rental income. Today, I see similar opportunities emerging again in certain markets. Investors should pay attention to areas experiencing population growth while still maintaining affordability. For example, parts of Brevard County have seen strong growth and are attracting investor interest as prices in previously affordable areas have risen. In recent months, we have completed several transactions that illustrate current opportunities. In one case, a distressed property listed on the MLS for $100,000 eventually sold after a lot of negotiation for $50,000. Without making any improvements, we relisted the property and sold it for $70,000. In another case, a tax-delinquent property was acquired for $110,000 and resold shortly thereafter for $145,000. Opportunities to buy properties and flip them for a profit exist when you buy at the right price. This leads us to the question of what strategies are working in today's market. The Buy, Repair, Rent, Refinance strategy (BRRR) continues to perform well, particularly if you focus on lower priced affordable housing. Investors benefit from a clear exit strategy because rental demand remains strong, rents are up significantly and financing options such as DSCR loans allow investors to qualify based on rental income rather than personal income. With rents remaining elevated since the pandemic, affordable rental properties—especially those eligible for programs such as ...

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