 The Impact of Los Angeles Wildfires on Housing and Insurance Markets: What Developers and Investors Need to Know
The wildfires currently ravaging Los Angeles have caused unprecedented damage, resulting in tragic loss of life and widespread devastation. As of today, the five major wildfires have burned approximately 60 square miles of the LA metro area, claiming 24 lives. While emergency efforts to contain the fires and protect residents remain a priority, it’s essential for real estate developers and investors to assess the impact on the local housing market, as well as the broader economic and insurance implications. Current Market Conditions and Housing Overview Data from Altos Research shows that the areas affected by the fires are some of the most expensive in Los Angeles, with rising inventory and market conditions that favor sellers. After the tumult of the post-pandemic housing market and the rapid spike in mortgage rates beginning in 2022, LA’s housing market has largely stabilized. The median home price in Los Angeles currently stands at $1.47 million, down slightly from the previous year. However, the long-term effects of these wildfires are still unfolding. The devastation to homes and infrastructure in several affluent neighborhoods—including Pacific Palisades, where the median list price is approximately $4.72 million—raises serious questions about the future dynamics of the market in these high-risk areas. Insurance Market Strain and the Role of the FAIR Plan The wildfire disaster is also putting California’s insurance market to the test. In recent years, insurers have been retreating from the state due to the escalating risks associated with natural disasters like wildfires. Many have stopped issuing policies in high-risk areas, forcing more homeowners to rely on the state’s insurer of last resort, the FAIR Plan. In response to the ongoing wildfires, California Insurance Commissioner Ricardo Lara has enacted a year-long moratorium on policy cancellations in the Pacific Palisades and areas impacted by the Eaton Fire, extending through January 2026. This move is part of an effort to stabilize the market as insurers assess their exposure to fire-related losses. AccuWeather estimates that the economic loss from the current wildfires could range from $135 billion to $150 billion, with the potential for even higher figures depending on the extent of the damage. The scale of this disaster places it among the costliest wildfire events in U.S. history. To put it in context, these losses could amount to nearly 4% of California’s annual GDP. J.P. Morgan analysts are now projecting fire-related insured losses could reach as high as $20 billion, a significant increase from initial estimates. In the Palisades alone, insurers are facing over $6 billion in potential claims. However, there are concerns that the FAIR Plan, with only $700 million in reserves, may struggle to meet these mounting obligations, potentially putting the state-backed insurer at risk of insolvency. The Broader Impact on Insurance Availability The recent uptick in catastrophic fire events follows a series of decisions by major insurers to scale back their operations in California. In March 2024, State Farm announced it would not renew 2% of its policies in the state, citing the increasing costs of catastrophe exposure, inflation, and difficulties related to California's stringent insurance regulations. This followed their earlier decision to stop accepting new applications altogether. Other major insurers, including Allstate, Travelers, and Chubb, have similarly adjusted their operations to limit their exposure to natural disasters. The growing difficulty in raising premiums under current state regulations, combined with the rising cost of reinsurance, has led to a contraction of coverage options in high-risk areas. CoreLogic estimates that nearly 200,000 homes in Los Angeles County are at high or very high risk of wildfire damage, with a total reconstruction value exceeding $145 billion. The fires currently affecting the region have already destroyed or damaged over 9,000 structures, further exacerbating the pressure on California’s strained insurance market. The Path Forward: Reforms and Rebuilding Efforts While the outlook for insurers remains uncertain, recent reforms implemented by the California Department of Insurance offer some hope for stabilizing the market. The “Sustainable Insurance Strategy” aims to reverse the exodus of insurers from the state by allowing more flexibility in rate increases, particularly in high-risk areas. These reforms are designed to balance the need for more affordable coverage with the realities of California's catastrophic risk profile. As developers and investors, it's important to stay informed about these regulatory changes and how they may impact property values and insurance availability in the near future. For those with exposure to wildfire-prone areas, it will be crucial to assess the viability of insurance coverage and factor potential rebuilding costs into financial forecasts. Looking ahead, the focus must now shift toward rebuilding the affected communities. The road to recovery will be long, but there are significant opportunities for thoughtful, sustainable development. As developers, we must prioritize rebuilding efforts that not only restore homes but also enhance resilience to future disasters. This includes incorporating fire-resistant materials, improved infrastructure, and modern zoning laws to mitigate the risk of future damage. The current wildfires have underscored the vulnerability of high-value neighborhoods and highlighted the ongoing challenges in California’s insurance and housing markets. For real estate developers and investors, staying ahead of regulatory changes, understanding the financial landscape, and engaging in thoughtful, sustainable development will be key to navigating the aftermath of this disaster. As we work to rebuild, it’s imperative to focus on both the immediate needs of displaced residents and the long-term resilience of the communities we serve. About Kaufman Real Estate Kaufman Real Estate is a leading real estate development firm specializing in innovative, sustainable projects across residential, commercial, and mixed-use sectors. With a proven track record of delivering high-quality developments, Kaufman Real Estate is committed to creating lasting value for clients and communities. Our team of professionals is dedicated to shaping the future of real estate by focusing on both today’s needs and tomorrow’s opportunities. For more information, visit www.dkaufmandevelopment.com or contact us at: Email: [email protected] The housing affordability crisis has been growing for a number of years. To address this issue, many people have said the country needs to build more houses — not affordable homes, but more houses in general. Many experts agree increasing the housing supply in pertinent areas with rising housing costs is crucial. However, this solution alone won’t solve the country’s housing affordability problems. Several issues beyond this don't make building more homes a one-size-fits-all solution. Various factors come into play, so here is a further look.  1. NEW HOUSING TARGETS YOUNGER, AFFLUENT INDIVIDUALS You would assume there would be more development where demand is highest — however, that’s not the case. Some cities like Houston have strong housing demand and somewhat affordable housing. Yet, people moving to this area aren’t wealthy enough to spend $2,000-$3,000 per month in rent. Most are in the working-class level looking for single-family homes or apartments, but Houston isn’t building much at all. On the other hand, Seattle’s market is booming from the high-tech sector, drawing in young, single tech-skilled people earning over six figures. However, most of the homes in Seattle are high-rise towers or mid-rise buildings. The average rent is around $2,000 for a one-bedroom apartment, so why is it still expensive to rent housing?  Because development can’t keep up with the pace of the explosive job growth. Therefore, people who get higher-paying jobs in Seattle aren’t finding as many places to live. Even if you do create more supply, this proposes the idea that more housing will filter out expensive ones. Suppose you build a new house and have a family who purchases it. Their old house would now cost slightly less, which would keep moving down the chain and so forth. However, these people are looking for homes large enough for families and the homes you see in cities like Seattle are geared toward affluent individuals. In short, the houses aren’t meeting their needs. 2. RENTERS HAVE LOW INCOMES Part of the issue why the country faces affordable housing options isn’t because there’s a shortage of rentals. In actuality, people lack the income to pay for what’s on the market today. One of the standards for budgeting rent is limiting those monthly payments to 30% of the tenant’s income. However, research shows 40% of rental residents are paying rent exceeding 35% of their income. Approximately 10.9 million Americans spent 50% of their income on rent — some making just $15,000 a year. In fact, 72% of renters making less than that amount were spending half of their annual paycheck on rent. According to Bookings analysis, 44% of Americans between 18 and 64 make low wages, estimating their median income to be $18,000. For households making $18,000, their rent should cost $450 per month at most. However, a report from Redfin shows the median rent is $2,002 in the U.S. Therefore, finding a home to rent for less than $450 is hard to come by and forces low-income renters into homes way over their budget. 3. DEVELOPERS CAN’T FIND SITES TO BUILD ON Another factor is that some cities — such as San Francisco — don’t have any buildable sites. Even if developers find a place, it’s still too expensive.  Plus, houses are already squeezing in together and if a developer does find a buildable site, they’d have to demolish buildings and prepare it. Projects like these can cost millions before breaking ground. Aside from the costs of developing more housing, suppose a developer bought a few homes to build a condo. If you factor in costs for acquisition, demolition and transaction fees, the condo units would still cost more to buy compared to the larger, more affordable homes. Additionally, densifying urban areas doesn’t make much sense in these scenarios since it doesn’t offset the impacts of expensive homes or working-class jobs. 4. SMALLER, AFFORDABLE HOUSES ARE EXPENSIVE TO BUILD With the shortage of affordable homes, you might wonder why developers aren’t building smaller homes. Wouldn’t that solve the high demand for affordable housing? Not exactly. Between the inflation costs and shortage of building materials due to the pandemic, construction costs have risen. According to the Producer Price Index report by the U.S. Bureau of Labor Statistics, construction prices have increased 19.2% yearly.  Of course, it may be more economical to build a smaller home. However, the affordability wouldn’t improve since the median home price was $416,000. Because everything costs more — land, supplies and labor — profit margins would be higher for building a larger home than a small one. Some experts predict a housing bubble will cause growth to slow down and decrease prices. Yet, even if home prices fell by 15%, this drop doesn’t make up for what has happened within the last few years. When you build more homes, inflation is still a primary concern since most people fall within the working-class category. 5. BUILDERS DON’T HAVE BUYERS Another problem is a wave of new homes has hit the market, but they’re not selling. Demand has slowed so much that builders have homes to sell and find themselves without buyers. In theory, the slowdown could continue if developers cave in and drop prices, resulting in a cut on land development. Yet, builders will be behind when the housing market does speed back up and families will still find themselves clamoring to look for a home.  Builders are also uncertain about what the future holds, so now they are looking project by project to see which ones they should pause. That is another issue entirely. In fewer terms, you have too many homes but not enough buyers. From a long-term perspective, this would be challenging on the opposite end of the spectrum. People will want houses, but there are not enough of them. This factor significantly contributes to the affordability problem when you have failed to keep up with demand. The Federal Reserve also works to cut down inflation by increasing interest rates, causing construction to pull back. That makes housing even more expensive because policymakers are focused on the current cost-of-living crisis, making the housing crisis worse. Because the housing market has responded so quickly to these actions, this forces builders to borrow more money to build homes. Then they sell them to buyers who borrow most of the home’s cost. Banks have to raise monthly borrowing rates in turn, causing both parties to pause. WHAT IS A VIABLE SOLUTION TO THE HOUSING AFFORDABILITY CRISIS? Are there any solutions to the problems the U.S. is facing with affordable housing? There are quite a few possibilities to take a look at below. 1. SUBSIDIZING RENT People renting an apartment should make 40 times what rent costs annually. Since 44% of Americans have low incomes, covering the difference between what they can afford and the total cost of housing would help.  The U.S. has already designed a program helping people afford housing with vouchers. The Housing Choice Voucher program has recipients pay the standard 30% of their income while covering the leftover balance. Some landlords are unfortunately reluctant to accept tenants who use these vouchers, but the program still makes a significant difference for those receiving them. It is currently helping millions of households for those that were eligible. 2. UPZONING SUBURBS Rezoning advocates need to look for the right places in cities developing new homes. Currently, urban areas have more zoning options than the suburbs. These diverse zoning areas have permitted large numbers of apartments while developers can build single-family homes on smaller lots.  3. PROVIDING INCENTIVES AND SUBSIDIES
There’s still the problem of costly materials and financing even if builders were legally allowed to start construction. With the expectation of private companies remaining in business during economic downturns, this risks financial ruin. Therefore, they need some way to get a return on their investment. One solution would be to have the government provide housing to counteract the supply cycle. If the government could assist in housing development, this would give the boost America needs to build affordable houses. On the other hand, it would make sense for the government to help families with rising costs by offering a loan program for first-time home buyers. But unless it builds new houses or creates incentives for builders, the housing shortage will continue to combat against the building industry. MOVING FORWARD THROUGH THE GOOD AND BAD TIMES Overall, the primary solution that wins is politics. It’s no secret the U.S. doesn’t have enough housing people can afford. However, it’s up to builders to keep building, whether in an economic downturn or not. Consultancy Encourages Taking 'One Step' Toward Transforming Neighborhoods  585 Niagara Street, a project done by Inc Dev alumni Bernice Radle. (Buffalove Development) Monolithic capital stacks are quaking; REITs are reshuffling; an economic downturn is looming. But amid a flurry of harbingers in the commercial real estate industry, one grassroots consultancy says it’s time for you — yes, you — to step up. Or not even necessarily “up.” “Take one small step off the curb” is the message from Incremental Development Alliance (Inc Dev), a national not-for-profit group of developers that wants to help anyone getting started in real estate. STEP, among the group, is an acronym for buildings that are small-scale, time-enhanced, entrepreneurial and purposeful. In a November workshop hosted by The Hopewell Downtown Partnership (HDP) in Virginia, mentors Ryan Terry and Richard Price championed the idea that everyday citizens who care about their communities are best suited to creating wealth and transforming their own neighborhoods one project (and one step) at a time. The First Step The key to this method is to first identify what’s missing in your local community. If you notice gaps in housing, retail, workplaces or services in your daily life, consider them opportunities. A corner store here, a duplex there; “these are the puzzle pieces that investors neglect,” Price said. Large developers nowadays are seeking returns from large single-family home developments and massive, high-end multifamily complexes, Price said. “But guess what? Most people don’t want to see a lot more of either.” Your advantage over large-scale developers is that you know what types of places actually enhance daily life in your community, he said. “You have skin in the game.” After spotting some opportunities to add value in a market, try to confirm your observations. Economic groups like HDP conduct studies on a given area’s fundamentals and should be sourced for data, Price said. “You really start by trying to understand the basic stuff about your market … like the existing rents and sale prices, and what buyers and renters are looking for.” A rudimentary grasp on the market will help crystalize what type of project makes sense for a given location. But more importantly, Price stressed, is to ask what makes sense for you. To do this, consider a couple of factors. “Do you own or have access to property of any size or kind?” Terry asked. “I don't care if it's 10 square feet on a street corner in the middle of nowhere, or if it's your own house. Is it worth considering it as a potential project?” Alternatively, do you own a business? “If you rent a commercial space, the next logical step is to consider a project that would also allow you to own the real estate that your business sits in.” Knowing someone who owns property can go a long way, too. “A lot of times they inherited it, but don't really know what to do with it, so it just sort of sits there,” Terry continued. “You show up with some cool ideas and figures and all of the sudden, you’ve got a partner.” Having property available is key. If you don’t own the land or have it under contract, “you’re at a high risk of wasting your time,” Price stressed. “I would strongly encourage you to focus first on getting a piece of land under contract and then figuring out what makes sense for that project — not the other way around.” Price started with his own house. “Renovating the basement [into a rental unit] gave me the confidence and a certain amount of savvy to start to understand what the residential real estate market was about in Charlottesville, and how to be a landlord,” he said. The Money Part By this point you’ll have discovered your “why,” Terry pointed out. “You have to understand what you want out of this. You may want to do one purposeful project, maintain a side-hustle or you may want development to be your new full-time job.” From there, an entrepreneurial real estate developer just needs a few more ingredients, according to the mentors: some people to help reinforce goals, whether that’s through investment, promotion or moral support; enough hustle and willingness to not quit when it inevitably gets hard; and, of course, some money — whether that’s yours or someone else’s. “The second step to becoming a developer is the money part,” Price said. “But don’t be scared,” he urged. “I really need to emphasize that real estate finance does not need to be complicated.” "Basically, if you can add and subtract, you can do a pro forma. And if you can do a pro forma, you can be a developer." - Richard Price Start with a pro forma, he said. “If you haven’t heard that term before, it’s basically just a score sheet for real estate development where you keep track of expenses and potential revenue. It answers the fundamental question of ‘how am I going to make money on a project like this?’” Get figures on “soft costs” in your area — things like how much designers charge, how much it costs to get a project approved by the municipality, and what to expect in legal fees. For “hard costs,” gather data on the price of materials and how much builders charge for similar projects. The pro forma will be a living document, Price continued. “You never get it right the first time; it's something to keep going back to and working on.” Luckily, he said, there are plenty of resources available to help create a pro forma for any type of project. But more important than how to get money from a project, is how to get money for a project. Both Terry and Price said they began developing with modest resources. “I had to borrow money from a bank,” Price said. “Then I went and raised a little bit of money here and there from people we knew.” Personal connections in the financial services industry can certainly help, Price said, but even without that, presenting solid fundamentals supported by a plan and passion should make it possible to land a loan. A community development financial institution (CDFI) in your area is also a good starting point, Inc Dev executive director Sherry Early chimed in. “CDFIs have less rigorous underwriting restrictions and they also have patient capital.” “It’s very difficult to do things in this business with bad credit and no cash,” Terry said. “But I’m here to tell you that all sorts of people have done it.” Early said she started with personal savings for her first project in Gary, Indiana, then found it increasingly easier to go through due diligence processes with banks and get loans on subsequent projects.  Entrepreneur Bernice Radle's 585 Niagara Street project. (Buffalove Development) The concept of “other people’s money” is crucial for real estate entrepreneurism, Terry said. Small projects — especially first projects, almost always start with one or two types of partners. Friends and family are a common source of seed money, but it all depends on who you know. Some people may be willing to contribute, but expect too high of returns, Terry said. “But if it’s someone who is otherwise getting 6% from a mutual fund and you can promise them 8%, you’re looking pretty good.” Most professional investors are looking for evidence of stable cash flow or a high return that reflects the risk they’re taking. “But on a first project, you have neither,” Terry said. “You’re high risk and not very potentially high reward,” and you have no long-term cash flow to show. “That’s why friends and family are your best bet.” The other type of partner is someone who can contribute property or “sweat equity," Price said; maybe they are willing to put in labor on renovations or even a contractor who contributes their skills and expertise. The developers recommended steering away from owner-financing for a first project, though. When the owner of a property sells you their property on interest, “typically it’s going to be more risky and more expensive to you as a borrower,” Terry explained. “The rates can be double or triple over prime. If you miss a payment and you’re late, they take that property right back and you’ve lost a lot of money.” Instead, seek out the “most vanilla form of financing possible” for your first project, he continued. “You’re going to make so many mistakes on your first project anyway. Don’t put yourself in a position where that mistake might be fatal.” Size Matters After observing the market, making sense of simple finances and seeking out some capital from friends, family, partners or a bank, Price said, it’s important to “right-size” your project. By that he means that “bigger isn't necessarily better.” The smaller the project, the more straightforward it is to develop, Price said. As you add space, the seesaw between costs and profits becomes harder to balance. “If you’re building a one-story building, it’s basically a simple box,” he continued. “No stairs, no elevator and minimal amounts of mechanical space. Just about every foot you build is rentable.” As you add size, you add complexity, he said. Costs per square foot go up, which means that the rents or sale prices required to achieve returns also go up. “If you start to get into really large-scale development, code requirements change,” Price elaborated. Fire protection requirements, for example, get more stringent. “You start to devote space to nonproductive uses. If you're building stairs, elevators, hallways, mechanical spaces and structured parking, that’s square footage you can’t get revenue from.” Your very first project is likely going to be really modest in scale, Terry said. “It’s likely going to be a renovation — and I’m not talking gutting a building, I’m talking about things like fixing a roof and painting. Maybe you rent it out, but maybe you have to sell it to establish a nest egg for your next project. If you’re starting with $0, like a lot of us do, you’ve got to start small.” Real Estate Development Is Like Farming But this isn’t about flipping buildings and making a quick buck, Price cautioned. “You're focusing on the long-term rewards of the project. You're helping build rich soil to nurture a place that can grow and help you with your endeavors as you're going forward. We call this ‘finding your farm.’” One successful project tends to lead to the next, Price continued. “As you start to do more projects, it starts to improve your neighborhood. The neighborhood starts to offer more opportunities, and suddenly you’re on a roll and instead of asking the questions, you're the person who’s answering questions for other people. Small-scale development tends to build stronger, more sustainable neighborhoods because the projects are typically flexible, Price said. “They're time-enhanced, meaning the buildings are designed to grow and adapt,” he continued. “What made sense 10 years ago may not make sense now, but with small, flexible buildings, it’s easy to convert them into something new.”  'Middle housing' example Eleven: 30 condominiums in Charlottesville, Virginia. (Courtesy of Richard Price) Price’s “farm,” the automobile-centric east side of Charlottesville, Virginia, “had been beaten up by many years of disinvestment,” he said. “It was not a vibrant neighborhood, but I saw a lot of potential; I looked around and said ‘wow, these are nice old buildings.’ There's some great natural features and it’s walking distance to downtown. I was one of those people who said, ‘what can I do here?’ And I started doing.” First it was a six-unit residential infill project that included mixed-use income, Price said. Then an old factory building converted to offices, restaurants and a bakery. Next some townhouses built on an old railroad yard. “Now I’m one of several developers working in this neighborhood and our collective efforts over time have started to transform this forgotten neighborhood into a place that's now in demand.” Ideas for First Commercial Real Estate ProjectsBuildings aren’t even necessary for incremental real estate development, though. The basic building block of urbanism is about bringing people together, Price said. Businesses like farmers’ markets, street fairs and food truck courts are ones you can start partnering with, possibly by hosting them on vacant land, before helping them graduate to brick-and-mortar spaces. Pop-ups and short-term rentals are also good first steps. “Bring someone from a tent into a more permanent solution,” Price said. “One of my colleagues bought an old industrial building and filled it with a bunch of desks, which he rents out as a coworking studio.” “Liner buildings” are another good option. This is a term for very small shops positioned on a street front to mask parking or other unsightly structures behind them, with facades that meet a city’s design approvals. Live-work housing, with a retail component on the first floor and apartments on the second, can also be a great first project that provides two sources of income. Examples of first projects from Inc Dev mentors and mentees run the gamut. Monte Anderson, for instance, bought a long-vacant property on the “wrong side of the tracks” of South Dallas and converted it into an incubator space for young entrepreneurs called Grow DeSoto Marketplace, Terry said. “He chopped a grocery store up into a bunch of 300- to 500-square-foot spaces and the rest is shared facilities and common space.” Part of Anderson’s model includes business mentorship, or basically the “Lord’s work,” Terry joked. “But what he has found is that because these spaces are so small, they are both profitable for him on a per square foot basis, at say $400 per month, but they’re also affordable to the tenants — the youngest of whom is a twelve-year-old who was since able to get a loan from the bank to operate his snow cone business.” Going-in costs can be low with old buildings, he continued, but end up being cash-flow positive with careful management, Terry continued. Alissa Shelton bought an old bank in a Detroit suburb and turned it into a community incubator space called Bank Suey.  Bank Suey, a community space in Hamtramck, Michigan. (Bank Suey) Others have renovated commercial spaces into middle housing, a term used for duplexes, fourplexes, cottage courts and small multiplexes that sometimes have a commercial component integrated or nearby. It’s a type of project Terry often finds himself gravitating toward.
Jenifer Acosta bought an old building with “terrible 1950s cladding that had beautiful brick underneath,” Terry said. “She renovated it and turned it into a commercial use downstairs and loft apartments upstairs.” Look at every building’s potential, he continued. Bernice Radle saw a “really plain commercial building — just a big, brick box, really — and rehabbed it into apartments on the upper floor with commercial uses downstairs. She put a cool mural on it [with the help of an established artist as well as volunteers] and got some cool tenants in there, and it’s a great cash-flow project.” In This Economy? With interest rates and inflation rising, even the biggest institutional players are currently balking on real estate projects, the developers concluded. “This model is not going to save you from all the other stuff that's going on in your economy, okay?” Terry said. “This is not a panacea.” But you, as an individual, “likely have a burning reason why you want to do this,” Terry continued. “You have to have your heart in it, because if you don’t, you’ll quit.” Wealth creation is likely a big reason, but one that won’t set you apart from large-scale developers. “It’s not that we’re out here doing this for charity,” Price said. “We all need to earn a living and hopefully build wealth over the long term. But for me, there’s nothing more gratifying than having the people in this neighborhood walk up to me and say, ‘that's a great project. We’d love to see more of that kind of project here in town.’” Daniel Parolek inspired a new movement for housing choice in 2010 when he coined the term “Missing Middle Housing,” a transformative concept that highlights a time-proven and beloved way to provide more housing and more housing choices in sustainable, walkable places. Missing Middle Housing: House-scale buildings with multiple units in walkable neighborhoods These building types, such as duplexes, fourplexes, cottage courts, and courtyard buildings, provide diverse housing options and support locally-serving retail and public transportation options. We call them “Missing” because they have typically been illegal to build since the mid-1940s and “Middle” because they sit in the middle of a spectrum between detached single-family homes and mid-rise to high-rise apartment buildings, in terms of form and scale, as well as number of units and often, affordability. In the diagram below, the Missing Middle types are shown in yellow, providing many housing options in between the single-family homes and higher intensity apartment buildings, both shown in white.  And while they are “missing” from our new building stock, these types of buildings from the 1920s and 30s are beloved by many who have lived in them. Ask around, and your aunt may have fond memories of living in a fourplex as a child, or you might remember visiting your grandmother as she grew old in a duplex with neighbors nearby to help her out. And today, young couples, teachers, single, professional women and baby boomers are among those looking for ways to live in a walkable neighborhood, but without the cost and maintenance burden of a detached single-family home. Missing Middle Housing helps solve the mismatch between the available U.S. housing stock and shifting demographics combined with the growing demand for walkability. We need a greater mix of housing types to meet differing income and generational needs. This is where Missing Middle Housing can change the conversation. — Debra Bassert, National Association of Home Builders  If there’s one thing Americans love, it’s choices: what to eat, where to work, who to vote for. But when it comes where we live or how to get around, our choices can be limited. Many people of all ages would like to live in vibrant neighborhoods, downtowns, and Main Streets—places where jobs and shops lie within walking distance—but right now those places are in short supply. Missing Middle Housing provides more housing choices. And when we have more choices, we create living, thriving neighborhoods for people and businesses. — Lynn Richards, President and CEO of the Congress for the New Urbanism What does the market want? Demand for Housing Choice A greater variety of household sizes and demographics require a greater variety of housing choices. Young, highly educated, technology-driven millennials desire mobile, walkable lifestyles. They are willing to exchange space for shorter commutes, mixed-use neighborhoods, and shared open spaces that foster community interaction. At the same time, baby boomers are working and living longer. They want to stay mobile and active in their later years, but they won’t drive forever and don’t want to be dependent on their family members to get around. They also want to find ways to stay in their community without having to care for a large home and yard. Multigenerational homes have increased by 17% since 1940, and that number continues to rise. The growing senior population, more families with multiple working parents, diverse family cultures, and an increased desire to live in intergenerational neighborhoods all contribute to the growing demand for multigenerational and even multi-family households. Affluent seniors seek to downsize from their large suburban homes to more convenient, easy-to-care-for townhouses, apartments, or condos, while others need quality, affordable housing that won’t break their limited budget. Many retirees would like to move close to, but not live with, their children and grandchildren. The growing demand for a walkable lifestyle has the potential to transform sprawling suburbs into walkable communities. 90% of available housing in the U.S. is located in a conventional neighborhood of single-family homes, adding up to a 35 million unit housing shortage. Source: Dr. Arthur C. Nelson, “Missing Middle: Demand and Benefits,” Utah Land Use Institute conference, October 21, 2014. Walkable and Accessible Amenities This country is in the middle of a structural shift toward a walkable urban way of living. After 60 years of almost exclusively building a drivable suburban way of life … the consumer is now demanding the other alternative,” wrote Christopher Leinberger in the New York Times article “Car-Free in America? Bottom Line: It’s Cheaper.” By 2025, up to 85% of households will be childless as millennials choose to marry later and have fewer children and the number of empty nester households continues to grow. Housing trends show singles demand more amenities, and women and older persons who live alone generally seek housing options that offer better security. They also drive less, reducing the need for off-street parking in private garages or lots, and increasing the need for accessible public transportation. The present economic research finds that business wants talent, but talent wants place—so more businesses are relocating to places. When drilled further the research finds Missing Middle Housing is the fastest growing preference because it has the ‘place’ quality talent seeks. Hence development of Missing Middle is now recognized as a housing AND economic development strategy. — James Tischler, Michigan State Housing Development Authority The National Association of Realtors, state that, walkability is fast becoming one of the most important factors in choosing where to live. People want of all ages want easy access to amenities such as stores, businesses, cultural center, and transit.Homebuyers are seeking locations within walking distance to shopping, cultural amenities, jobs, and open space and the value of homes in these types of neighborhoods has increased at a much faster pace than homes in driveable suburban neighborhoods. “In a scenario where two houses are nearly identical, the one with a five-foot-wide sidewalk and two street tress not only sells for up to $34,000 more, but it also sells in less time,” wrote J. Cortright, in CEOs for Cities’ Walking the Walk: How Walkability Raises Home Values in U.S. Cities. But, as the chart at the right shows, now you don’t have to live in a dense urban center to live a walkable lifestyle. Some 70% of upcoming, walkable places in Washington D.C. are quaint neighborhoods located outside of the urban core. Variety of TransportationAccessibility to useful multimodal transit—public transportation, bike friendly streets, and car share—is needed by baby boomers and desired by millennials. But there is an economic argument, too. “American families who are car-dependent spent 25% of their household income on their fleet of cars, compared to just 9% for transportation for those who live in walkable urban places,” says Leinberger. Walkable neighborhoods are now a top priority for seniors, along with access to transportation, and connectivity. Source: What’s Next? Real Estate in the New Economy, Urban Land Institute, 2011; Transportation for America. The same is true for bike friendly cities. According to the Livable Street Alliance, as reported on the AARP Livability Fact Sheet, the average American household spends more than $8,000 a year on cars while the cost to maintain a bicycle is only about $300 per year. These savings, which could amount into the billions if trends were widely adopted, could be reinvested into transit-oriented development and infrastructure, education, and health care. Cities and property owners benefit from less car dependent zoning too. “An off-street parking space costs between $3,000 and $27,000 to build, and about $500 a year to maintain and manage. On-street parking is more efficient and can bring in as much as $300,000 per space in annual revenues,” writes Prof. Donald Shoup, in Instead of Free Parking. An increasing number of Americans spend close to 30% of their income on housing while transportation costs can consume an additional 20% or more of household income. Source: What’s Next? Real Estate in the New Economy, Urban Land Institute, 2011. AffordabilityHousing affordability is a primary concern for many Americans across the country ranging from blue-collar workers to early-career singles, young families and seniors. There is an increasing segment of the population that spends more than 30% of their income on housing, reducing their purchasing power for other amenities (Source: What’s Next? Real Estate in the New Economy, Urban Land Institute, 2011). Smaller homes and apartments cost less to rent or purchase and maintain, while urban neighborhoods provide services and amenities within walking distance as well as a variety of affordable transportation options. Cities and towns that want to retain or attract these household types need to focus on providing diverse, affordable housing options near jobs, schools, and other amenities within walkable communities. In addition, suburbs that want to retain their aging populations and attract newer, younger families, will need to create new, walkable urban environments and encourage the construction fo Missing Middle Housing through rezoning and by providing public transportation options. Sense of Community More and more, Americans say living in a diverse community that includes people at all stages of life is an important factor in determining where to live. Seniors want to live near family and friends, but not with them. Missing Middle building types allow people to stay in their community thoroughout their lives because of the variety of sizes available and an increased accessibility to services and amenities. Almost 49% of Americans are living in a multigenerational household. Source: Pew Research Center analysis of U.S. Decennial Census and American Community Surveys. According to Chris Leinberger in his article “The Next Slum?” for The Atlantic, elements that used to draw families into the suburbs—better schools and safer communities—are now becoming the norm in cities, while these elements could worsen in suburbs that are dependent on home values and new development. Housing market projections suggest that construction in the near future will accelerate only moderately for single-family housing but will greatly increase for multifamily housing (Source: Jordan Rappaport, “The Demographic Shift From Single-Family to Multifamily Housing,” Economic Review, Kansas City: Federal Reserve Bank of Kansas City, 2013). Implemented in both urban and rural contexts, Missing Middle Housing allows people to stay in their community during different stages of life because of the wide variety of sizes, housing levels, and accessibility it provides. What are the characteristics of Missing Middle Housing? Missing Middle Housing is not a new type of building. It is a range of house-scale building types that exist in cities and towns across the country and were a fundamental part of pre-1940s neighborhoods. They are most likely present on some of your favorite city blocks—you may even have them in your own neighborhood. When a variety of Missing Middle building types are combined in a neighborhood (and usually with detached single-family homes), this helps to provide enough households within walking distance to support local businesses and public transit. On closer look, Missing Middle types are found within many of the most in-demand communities in places like Denver, Cincinnati, Austin and San Francisco. So what do Missing Middle building types have in common?
Missing Middle housing types are best located in a walkable context. Buyers and renters of these housing types are often trading space (housing and yard square footage) for place (proximity to services and amenities). The images below from Austin, TX, show the difference between walkable and non-walkable environments. On the left is the walkable urban neighborhood of Bouldin Creek, where the well-connected street grid and development pattern make walking and biking convenient and support robust public transit. On the right is the neighborhood of Northwest Hills, less walkable and more auto-oriented in character.  Walkable context (left); Auto-oriented context (right); Austin, TX A walkable context means not just pedestrian facilities such as sidewalks and protected crossings, but also destinations to walk to. The map below from Greenville, SC shows an analysis of parcels that are truly “walkable”, and fall within a 10-minute walking distance of “centers” that provide services, shopping and transit.  Walkable neighborhood analysis; Greenville, SC Small-Footprint Buildings These housing types typically have small- to medium-sized footprints, with a body width, depth and height no larger than a detached single-family home. This allows a range of Missing Middle types—with varying densities but compatible forms—to be blended into a neighborhood, encouraging a mix of socioeconomic households and making these types a good tool for compatible infill.  Lower Perceived Density Due to the small footprint of the building types and the fact that they are usually mixed with a variety of building types even on an individual block, the perceived density of these types is usually quite low—they do not look like dense buildings. But one of the primary benefits of Missing Middle Housing is that it helps provide the number of households needed for transit and neighborhood-serving local businesses to be viable (typically about 16 dwelling units per acre). As shown below, a block with only single-family homes (left) generates low densities that do not support nearby amenities or transit. When Missing Middle Housing is thoughtfully integrated (right), it increases the population density to the threshold required to support neighborhood commercial amenities and transit.  Smaller, Well-Designed Units Missing Middle housing types have smaller units. The challenge is to create small spaces that are well designed, comfortable, and usable. The ultimate unit size will depend on the context, but smaller-sized units can help developers keep their costs down and attract a different market of buyers and renters who are not being provided for in all markets. Smaller, well-designed units are very attractive to the 30 percent of US households that are single-person household, baby boomers that want to downsize, and other households choosing to live small for environmental reasons. Since Missing Middle types work well for both for-sale and rental housing, this further increases their appeal as more and more people nowadays are choosing to rent for longer or even permanently, over home ownership. Fewer Off-street Parking Spaces Because they are built in walkable neighborhoods with proximity to transportation options and commercial amenities, Missing Middle housing types do not need the same amount of parking as suburban housing. We typically recommend no more than one parking spot per unit, and preferably less. In fact, requiring more than one parking space per unit can make Missing Middle types infeasible to build. For example, if your zoning code requires two parking spaces per unit, a fourplex would require eight parking spaces, which would never fit on a typical residential lot. In addition, providing that much off-street parking for each fourplex would create a neighborhood of [remove ‘small’] parking lots rather than the desired neighborhood of homes. Less parking means more households on the same amount of land, increasing the viability of transit and local businesses. The cost of providing parking also has a tremendous impact on overall feasibility of development, and housing affordability, as illustrated by the table below.  Simple Construction Missing Middle Housing is simply constructed (wood-frame/Type V), which makes it a very attractive alternative for developers to achieve good densities without the added financing challenges and risk of more complex construction types. This aspect can also increase affordability when units are sold or rented. As providing single family detached sub-$200,000 starter homes is becoming increasingly out of reach for builders across the country, Missing Middle Housing can provide an attractive and affordable alternative starter home.  Creates Community Missing Middle Housing creates community through the integration of shared community spaces within the building type (e.g. cottage court), or simply from being located within a vibrant neighborhood with places to eat, drink, and socialize. This is an important aspect in particular considering the growing market of single-person households (nearly 30% of all households) that want to be part of a community. Missing Middle housing helps to create a shared sense of community, as seen in the example below from Conover Commons, Redmond, WA. Source: The Cottage Company.  Marketable Because of the increasing demand from baby boomers and millennials, as well as shifting household demographics, the market is demanding more vibrant, sustainable, walkable places to live. These Missing Middle housing types respond directly to this demand. In addition, the scale of these housing types makes them more attractive to many buyers who want to live in a walkable neighborhood, but may not want to live in a large condominium or apartment building. The graphs below highlight the shifting demand for walkable living and Missing Middle Housing.  If there is land for beautifully-designed homes that fill a gap between stand-alone houses and mid-rise apartments, the smart thing to do is to fill it with housing types we’ve been missing in our market for so long. — Heather Hood, Deputy Director, Northern California, Enterprise Community Partners How does Missing Middle Housing integrate into blocks? Missing Middle Housing types typically have a footprint not larger than a large detached single-family home, making it easy to integrate them into existing neighborhoods, and serve as a way for the neighborhood to transition to higher-density and main street contexts. There are a number of ways in which this can be accomplished:
Missing Middle Housing types are spread throughout the block and stand side-by-side with detached single-family homes. This blended pattern of detached single-family homes and Missing Middle Housing types, with densities up to 40 dwelling units per acre, works well because the forms of these types are never larger than a large house.  Placed on the end-grain of a block Missing Middle Housing types are placed on the end-grain of a block with detached single-family homes, facing the primary street, which is often a slightly busier corridor than the streets to which the detached single-family homes are oriented. The most common condition is to have several fourplex units on the end grain lots facing the primary street. This configuration is usually located on the end grain of several continuous blocks adjacent to a neighborhood main street, which increases the blended density to achieve the 16 dwelling units/acre necessary to support small, locally-serving commercial and service amenities, and transit. This configuration allows for the use of slightly larger buildings because the Missing Middle housing types are not sitting next to detached single-family homes. In this block type, the alley to the rear of the lots also allows for a good transition in scale to the detached single-family home lots behind them. Often you will see a similar block configuration with one or two fourplexes on the corners of the end grain lots on the block.  Transitioning to a commercial corridor Missing Middle Housing is excellent to transition from a neighborhood to a Main Street with commercial and mixed-use buildings. These types are generally more tolerant and better able to effectively mitigate any potential conflicts related to the proximity to commercial/retail buildings or parking lots behind commercial buildings.  Transitioning to higher-density housing Smaller-scale Missing Middle Housing types are placed on a few of the lots that transition from the side street to the primary street, providing a transition in scale to the larger buildings on the end grain of the block along the primary street.  For us, mixing housing types is important in today’s market. Buyers want choices, the investors and lenders want more flexibility in the projects, and planning officials expect a more thoughtful integration into the existing neighborhoods. The mixing of product provides a diverse community, enhances value, and it helps create the type of place our buyers are looking for today. — David Leazenby, Onyx+East What’s the best way to enable Missing Middle Housing? (Hint: Conventional Zoning Doesn’t Work) Problems with Conventional Zoning by Land UseConventional (Euclidean) zoning regulates primarily by land use, dividing neighborhoods into single-family residential, multifamily residential, commercial, office, etc. This separation of uses creates the opposite of mixed-use walkable neighborhoods. Along with use, conventional zones typically rely on numeric values, such as floor area ratio (FAR) and density, which results in unpredictability and creates all sorts of barriers to Missing Middle Housing. Missing Middle Housing (MMH) are multi-unit, house-scale buildings intended to be part of low-rise residential neighborhoods. However, these types of neighborhoods are often zoned as single-family residential disallowing multi-family buildings, thus preventing Missing Middle types from being built. Yet, there are numerous examples across the U.S. where, for example, a house-scale fourplex fits in nicely with single-family detached houses. Why? Because it’s the same size and footprint as a typical single-family home. Conventional zoning creates multifamily zones that typically allow much bigger buildings – both taller and wider – than Missing Middle types. This also encourages lot aggregation, often leading to large suburban garden apartment buildings. The end can be an awkward juxtaposition of these very different residential environments, often with abrupt transitions in form and scale. Missing Middle types can successfully bridge these two environments, if allowed. Conventional zoning codes often fail to regulate building size and form in proportion to lot sizes, that can lead to awkward relationships between neighboring properties. Form-based standards avoid such incompatibility by regulating building forms, massing and transitions.  Zoning by Density Another reality that we’ve found is that most communities regulate housing projects with the residential density tool. In addition to this tool not being clear about what form the buildings might take, density-based zoning doesn’t work with the “blended densities” found in neighborhoods where Missing Middle Housing (MMH) thrives. MMH buildings are similar in form and scale to detached single-family homes. But because they include from 2 to 12 units on a lot, MMH buildings often vary dramatically in their densities compared to houses. This makes it either illegal to build them in many zones, and complicated to regulate with a density-based system. For example, consider a cottage court that can have net densities from 14 to 21 units per acre (or more with alley-loaded lots), even though the buildings are only one story tall, and each cottage is only 25 feet by 30 feet (slightly bigger than a 2-car garage). This low-intensity, house-scale multi-family type is an excellent way of adding housing while blending in with single-family homes. However, this type would not be allowed in many conventional single-family residential zones (since it has multiple units) and may also not be allowed in conventional multi-family zones that operates on density standards. For instance, if a multi-family zone allows a maximum density of 35 dwelling units per acre with few form standards, builders/developers will tend to max out the lot with a large, out-of-scale apartment building, rather than building the cottage court that the neighborhood would prefer. This is because, typically, an investor will tend to use every allowed unit and not leave money on the table. It’s just common sense and human nature. Another issue with density-based zoning is that tends to treat all units the same regardless of size. This means that a 3,500-square-foot unit is considered the same as a 600-square-foot unit for calculations such as density, parking and open space. The lack of recognizing these differences in size discourages much-needed, smaller units. For example, using conventional zoning, a fourplex with four, 600 sf units would require four times the parking and open space as a 2,400 sf detached single-family home, even though the amount of building area is the same. This presents confusion and barriers, typically making the fourplex unfeasible to fit on a typical lot. Barriers to Missing Middle Housing from Conventional Zoning Conventional or Euclidean zoning has inadvertently created a number of barriers to enable the design and delivery of Missing Middle Housing. Some of the key issues are:
Form-Based Coding is a proven alternative to conventional zoning that effectively regulates Missing Middle Housing. Form-Based Codes (FBCs) remove barriers and incentivize Missing Middle Housing in appropriate locations in a community. FBCs represent a paradigm shift in the way that we regulate the built environment, using physical form rather than a separation of uses as the organizing principal, to create predictable, built results and a high-quality public realm. The Form-Based Approach to Regulating Missing Middle HousingThe form-based approach starts with a Community Character Analysis of the community’s existing patterns of development and built form, climate, and other considerations. Looking at the existing patterns and desired future built form, a range of form-based zones are created. For each form-based zone, a specific range of housing types are allowed, that would allow the neighborhood or community to evolve while ensuring compatibility with existing buildings. For example, in a walkable residential neighborhood, allowed building types may include single-family detached homes, cottage courts, and side-by-side duplexes. In a more urban walkable neighborhood, cottage courts, side-by-side duplexes, stacked duplexes, fourplexes, and small multiplexes may be allowed. In addition, for each building type, a Form-Based Code typically provides supplemental form standards that are calibrated to ensure good urbanism and prevent overbuilding in terms of height and bulk. For example, a cottage court typically allows for 6 to 8 units, but also specifies form standards such as a maximum height of 1 to 1.5 stories, a maximum building footprint/unit size of around 800 square feet and a minimum size for the shared courtyard or green space.   Regulating with building types and this fine-grained approach allows for more predictable built outcomes. For instance, on a 100′ by 100′ lot, an FBC can allow two fourplexes, or a cottage court with eight small, one-story units; but not a single, larger eight-unit apartment building. For these reasons and more, Form-Based Coding is the most effective way to enable Missing Middle Housing. “I want to thank you for your great work on Missing Middle Housing! It has been useful in my current research on policy reforms to support more affordable infill development in Victoria, B.C., and informing my report ‘Affordable Accessible Housing in a Dynamic City.’ — Todd Litman, Victoria Transport Policy Institute More information about Form-Based Codes, see:
 The shortage of starter housing compounds the country's mounting crisis. It’s no secret that many markets across the country have serious shortages of housing for their workforce populations. “Most cities and regions have fallen behind on housing delivery,” observed Daniel Parolek, architect, urban designer and author of Missing Middle Housing: Thinking Big and Building Small to Respond to Today’s Housing Crisis (2020). impacts those who want to buy homes rather than rent too, notes Nicholas Julian, senior program manager for land use at the National Association of Home Builders. “A staggering 96.5 million households, or roughly 73 percent of all U.S. households, cannot afford a new home at (the current $425,786) median price point,” Julian remarked. Julian and Parolek agree that adding missing middle housing to our nation’s stock can help ease the shortage. “These are homes that are more attainable for valuable members of your community including teachers, nurses and firemen,” Julian suggested. “Missing middle housing units, like duplexes and townhouses, may be what is attainable as ‘starter housing’ for folks entering homeownership for the first time these days.” These dwellings can also suit college students, young renters, seniors and young condo buyers. “There are many families who are doubling up in households or with roommates due to affordability,” commented Jessica Lautz, deputy chief economist for the National Association of Realtors. “More affordable solutions may allow young adults to leave the nest or roommates to have household formation independently.” Defining missing middle Missing middle has two meanings: The first is Parolek’s, which is housing that bridges the functional gap between detached single-family homes and mid-rise complexes. It’s the duplex to fourplex, townhouse and courtyard apartment, compact live/work spaces and right-sized buildings that fit architecturally into low-rise neighborhoods with detached single-family homes. It’s also defined as housing in the middle of the price range, between subsidized affordable units for those at or below the poverty level and luxury units for the affluent. There’s a sweet spot where these two definitions converge that millions of would-be tenants and homeowners that serve us all in our cities’ commerce and civic workforce compete to live in. Enhancing livability The goal is creating missing middle projects that enhance livability. They tend to fit well into walkable neighborhoods with coffee shops, restaurants and small markets safely accessible on foot. Pocket playgrounds every quarter mile and conveniently located co-working spaces make these communities appealing to many prospective residents, the architect notes, and potentially engender less development opposition from established neighborhoods. “In our world, where NIMBYs are everywhere and they push hard against any non-single-family projects, the size, scale, and typology of these ‘house scale’ buildings support an easier path to rally community support, especially those that are predominantly single-family home communities,” Parolek remarked. David Spence, CEO of Dallas-based Good Space, renovates missing middle rentals in one of the city’s emerging neighborhoods. Spence attributes the success of his missing projects, including one that became a case study for Parolek’s book, to an emphasis on quality and detail. “We’ve always spent beyond the market on renovations, and it has always worked out in the end in the form of sufficient rents and potential [building] sales prices,” he shared. “We squeeze in a ‘full appliance package’ (e.g., washer/dryer, central HVAC, microwave, vent hood, etc.), but parking is scarce, usually uncovered, and sometimes curbside. There’s no fitness center, no palatial bathrooms, no dog park.” But the firm provides quality in other ways through restoration of old fixtures and finishes, a sense of community, lively color schemes. Since these features don’t cost as much as much as a swimming pool and jacuzzi, Good Space is able to control their basis. Missing middle demographics Parolek sees missing middle housing especially appealing to single- female households, an often overlooked segment, he finds. “Keep in mind that 30 percent of most markets are single-person households,” explained. “A well-designed small unit with higher-quality finishes is ideally what they want. They also like the built-in sense of community and security.” Downsizing Baby Boomers are another good market, he points out. “They are looking for walkability to amenities, a sense of community, and the ability to lock off the unit and travel without having to worry about maintenance,” he explained, noting AARP has included missing middle housing in its Livable Communities Initiative. Another niche Parolek identifies is the household seeking a car-free lifestyle. Walkability and easy transit access is key for these prospects. Opticos-designed Culdesac Tempe, a 650-unit Arizona master-planned community. “It will be the largest car-free community in the United States when completed,” he commented. Last, but definitely not least, is the multi-generational opportunity, where grandparents can live close to their adult children’s families while having their own place in the same community. “Missing middle has historically provided great opportunities to deliver multi-generational housing and will also do so in the future,” Parolek predicted. He sees that encompassing different housing types that can be flexibly combined and separated as kids go off on their own, boomerang kids return, and childcare or eldercare support is needed. Private and profitable One point Parolek is eager to make is that these missing middle projects can definitely be built profitably since they are not dependent on nonprofit organizations to bring them to fruition, like many affordable developments, and they can provide marketing opportunities to sophisticated renters with no competition. “When we opened our first renovated apartment building in 1996,” Spence recalled, “we assumed—based on patterns of the day—that our tenants would preponderantly be gay men moving from similar in-town neighborhoods. As it turns out, 75 percent of our first rent roll came from suburban addresses and 60 percent were single, straight women. While we definitely skew ‘urban’—artsy, alternative, adventurous—our rent roll has remained conventional in many ways: educated, fiscally responsible, generally sober, 30s-ish, upwardly mobile, connected to the community, etc.” While many missing middle projects have been built by smaller local firms like Good Space, Parolek also recommends them being integrated into larger master-planned communities and attracting larger regional and national builders. He sees that as a better development model and competitor to single-family build-to- rent that may be more appealing to city halls and statehouses. Jeff Kottmeier, senior vice president with John Burns Research and Consulting, points to employers acknowledging the need for attainable workforce housing in their conversations with economic development teams. “Some companies are coming to the table saying, ‘I’ll build x units of apartments or homes’ when constructing a new manufacturing facility,” noted. “We’ve seen that in some of the consulting studies we’ve completed in manufacturing towns.” Rezoning and other challenges Two of the reasons why this category has lagged are economic and regulatory barriers, though cities and states are looking hard lately at zoning changes to generate more housing opportunities. “Recently passed state legislation allows up to four units on any single-family lot in Oregon, California, Nebraska, and Washington,” Parolek reported. “A few other states like Montana and New Hampshire have legislation in the works.” He’s working with other cities to remove policy, planning and zoning barriers for missing middle housing development, he adds. Julian calls re-zoning the low-hanging fruit of the housing affordability challenge. “Simply changing codes to legalize housing that is not the traditional large single-family home on a large single-family lot will allow housing that is naturally less expensive,” he observed “It is not the be-all and end-all, but there is little downside of zoning reform to allow missing middle housing development if housing affordability is a true priority.” The NAHB executive notes that, for most home builders, there is little control over cost inputs like development fees, labor, materials and land. “Municipalities have the ability to alter codes and land use policy to make it legal to build smaller units on smaller lots, naturally producing more affordable housing,” he said. New construction faces a particularly difficult route due to the need for land, regulations, and then basics such as material costs, according to NAR’s Lautz. “Adaptive reuse may be an easier route in some communities where there are existing vacant properties that can be rezoned for higher density residential housing,” she noted. Some cities, are encouraging infill/density where existing townhomes are torn down and rebuilt, adding an additional floor and more square footage. “Washington, D.C., is an example where you see homes with a fourth or fifth floor that can be rented as a single townhome or separate units,” Kottmeier said. The biggest cost barrier is that any three-unit or larger housing types trigger the use of commercial building code, Parolek lamented. “We obviously do not want to create dangerous living environments, but it seems like codes make it far too expensive to build these smaller, multi-unit buildings,” he suggested, noting some three- or even six-unit buildings are actually smaller than large single-family homes. “Maybe research could be developed to help define less onerous and less expensive life-safety requirements for buildings up to 10 units to make them more viable.” This is a bipartisan cause that increases property rights and also helps create more workforce housing for middle class citizens, Julian said. “Cities need to refine zoning to remove barriers and find more areas and processes to allow this,” he declared. Advocates like Parolek are working on this. Jamie Gold, CKD, CAPS, MCCWC is a Forbes.com contributor, wellness design consultant, industry speaker, and award-winning author of Wellness by Design (Simon & Schuster, 2020).
https://www.multihousingnews.com/how-missing-middle-housing-can-boost-livability-attainability/  Despite the fluctuations in the housing market in recent years, real estate investment continues to be an attractive asset class for investors. With the potential to earn recurrent income from rentals, real estate can be a lucrative investment opportunity. Although the current scenario of high-interest rates may give some investors pause, the right investment in the right market can still yield significant returns. Investing in real estate can still be considered a viable option despite the current scenario of high-interest rates in 2023. Real estate remains an attractive asset class for investors due to the opportunity to earn recurrent income from rentals. Record-low mortgage rates and a scarcity of available inventory kept the US housing market strong in terms of buyer demand in the past two years. Although mortgage rates have risen, the strong housing demand is still driving prices up, albeit slowly. The US housing market continues to be a somewhat moderate seller's real estate market, with annual price growth slowing down and inventory rising. Potential homebuyers may still face a bidding war if they are looking for a new house at the moment. As a real estate investor, it is important to crunch the numbers and determine the best cities to invest in. During the pandemic, prospective homebuyers around the United States paid top dollar for homes, with remote employees and their desire for more lavish homes fueling the market. However, with the lack of homes for sale, many potential buyers may be unable to find affordable entry-level housing, predisposing them to transition into single-family rentals. Rental demand is expected to continue to increase in 2023 as a result. The single-family rental market in the US remained robust as renters flocked to the suburbs in Q3 2022, according to Arbor's Q3 2022 Single-Family Rental Investment Trends Report. SFR is seen as a viable alternative for potential homebuyers who are priced out of home ownership. The report showed that SFR rent growth slowed but remained elevated, while build-to-rent (BTR) construction starts reached a new record high of 69,000 over the past year. Additionally, cap rates remained unchanged at 5.3% despite rising interest rates. This presents a great opportunity for real estate investors looking to purchase single-family rental properties. This asset class is best positioned to grow in the coming years. The interest of investors in single-family rental homes has risen to a great extent during this pandemic. Large investors are gravitating toward it. However, it is important to conduct thorough research and choose the best places to invest in real estate in 2023. All real estate is local, so understanding the local factors that can affect your investment is crucial. Single-family rental homes provide an affordable and flexible option to meet the needs of families and individuals in search of quality housing. As of now, institutional investors account for only 2 percent of the 90-million unit market, according to NHRC. This is meager as compared to the US multifamily sector, where more than 50 percent of ownership is held by institutional investors. Hence, the single-family rental market remains an emerging market for both individual and institutional investors. In conclusion, despite rising interest rates, investing in real estate can still provide a reliable source of recurrent income. The single-family rental market is particularly promising, as it continues to grow and attract more investors. It's important to do your due diligence when selecting a city to invest in, but with the right research and strategy, real estate can be a great investment opportunity. Let's take a look at some of the best places to invest in real estate. How To Choose the Best Places To Invest In Real Estate? You may be located anywhere in the world, but the basic principles of the real estate business remain unchanged – you want to choose those places for your investment properties where the return on investment is high. To maximize the returns from your real estate investment you want to buy property in places with the following features:
Don't take any uninformed decision without evaluating the fundamentals of the real estate market you intend to purchase in – is it growing, stable, or declining? Are you planning for short-term capital gains or long-term buy and hold? If you're considering a real estate investment in the coming year, there are a few markets worth investigating further due to anticipated price increases. We looked at data and examined trends from across the US to bring you this list of the 21 best places to invest in real estate. Here are the best places to invest in real estate and buy rental properties. They all have their own set of qualities and disadvantages, but many of them are less expensive than the national average.
1. Boise, Idaho Boise, the capital city of Idaho, is becoming a popular destination for real estate investors for several reasons. Boise's strong job market, affordable housing, growing population, stable real estate market, and low property taxes make it an attractive destination for real estate investors. Whether you are looking to purchase a rental property or invest in real estate for capital appreciation, Boise offers a great opportunity for investors. Here are the top reasons why Boise is considered one of the best places to invest in real estate: Real Estate Appreciation: The real estate market in Boise, Idaho has shown strong growth over the past 10 years, with a home appreciation rate of 217.86% and an average annual rate of 12.26%, putting it in the top 10% nationally for real estate appreciation, according to NeighborhoodScout's data. Despite a lower appreciation rate of 7.62% over the last year, Boise's latest quarter showed a 3.87% appreciation rate, equivalent to an annual rate of 16.41%. However, this rate is lower compared to 80% of the other cities and towns in Idaho. It is important to note that while these are average rates for the city, individual neighborhoods within Boise can vary greatly in their investment potential. Strong job market: Boise has a thriving economy, driven by a strong job market in industries such as technology, healthcare, and education. This growing job market attracts new residents, which drives demand for housing and increases property values. Affordable housing: Compared to other major cities in the US, Boise offers more affordable housing options, making it an attractive option for first-time homebuyers and investors. This, in turn, can lead to steady rental income for investors and the potential for capital appreciation over time. Growing population: Boise is experiencing steady population growth, as people are attracted to the city's high quality of life, outdoor recreational opportunities, and affordable cost of living. This growing population drives demand for housing, which can lead to increased property values. Stable real estate market: Boise has a stable real estate market with a low rate of foreclosures and a consistent rate of home price appreciation. This makes it an attractive option for investors who are seeking stability and predictability in their investments. Boise, ID Real Estate Trends: The median listing home price in Boise, ID was $528.9K in December 2022, trending down -2.9% year-over-year. The median listing home price per square foot was $292. Boise, ID was a seller's market in December 2022, which means that there are more people looking to buy than there are homes available. The market had a total sales-to-total listings ratio above 0.2, which tends to favor sellers. On average, homes in Boise, ID sell after 62 days on the market. The trend for median days on market in Boise, ID has gone up since last month, and slightly up since last year. These housing market trends in Boise are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 2. Houston, Texas Houston is one of the all-time best places to invest in real estate. This city is the home of the US oil and gas industry and offers perennial employment opportunities. Greater Houston is Texas' fifth-largest metro region, with over 7.2 million residents, and its population continues to expand at a rate nearly double that of the rest of the country. Forty-one Fortune 1000 companies are headquartered in the Houston region. Houston ranks fourth in the nation on this measure, behind Greater New York, Chicago, and Dallas-Ft. Worth. These strong macroeconomic factors continue to power the Houston housing market. Houston, Texas has several factors that make it a strong market for real estate investment. Some of the reasons include:
The market had a total sales-to-total listings ratio between 0.12 and 0.2. On average, homes in Houston, TX sell after 59 days on the market. The trend for median days on market in Houston, TX has gone up since last month, and slightly up since last year. These housing market trends in Houston are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 3. Dallas, Texas Dallas is another good place to invest in real estate in 2023. Dallas, Texas is one of the most rapidly growing cities in the United States, and for good reason. It has a thriving economy, a growing population, and a diverse real estate market that offers opportunities for both residential and commercial investments. Dallas is a great place to invest in real estate due to its strong job market, affordable housing, growing population, diverse real estate market, positive real estate trend, and pro-business environment. Whether you're looking to invest in residential or commercial properties, Dallas has something to offer everyone. Here are some of the top reasons why Dallas is one of the best places to invest in real estate:
The market had a total sales-to-total listings ratio between 0.12 and 0.2. On average, homes in Dallas, TX sell after 62 days on the market. The trend for median days on market in Dallas, TX has gone up since last month, and slightly up since last year. These housing market trends in Dallas are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 4. Las Vegas, Nevada How can we miss Las Vegas on our list of best places to invest in real estate? Las Vegas has experienced several booms in its history. And it saw an incredible real estate bust during the Great Recession. Las Vegas’ recovery hasn’t made the same headlines as the 50% or greater declines in home values did a decade ago. Yet its recovery shouldn’t keep investors away. Throughout the pandemic, the Las Vegas housing market was among the hottest in the United States. Las Vegas is a city that is known for its vibrant entertainment scene, luxury casinos, and world-class dining experiences. However, it's not just a great place to visit, but also a prime location to invest in real estate. Las Vegas is an excellent location for real estate investment, with a strong job market, high rental demand, affordable housing, a growing population, investment in infrastructure, a thriving tourist industry, and favorable tax benefits. If you are considering investing in real estate, Las Vegas is a prime location to consider. Here are the top reasons why Las Vegas is one of the best places to invest in real estate:
Pioneer Park is the most affordable neighborhood, with a median listing home price of $290.5K. These housing market trends in Dallas are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 5. Atlanta, Georgia Atlanta, Georgia is a city that has experienced remarkable growth in recent years and is now considered one of the best places to invest in real estate. From its booming economy to its diverse culture, there are numerous reasons why you should consider investing in Atlanta real estate. Atlanta is Georgia’s capital and economic center. It is considered one of the 10 most productive states that contribute to the USA’s GDP annually. Atlanta is a city that offers a lot of potential for real estate investors. From its strong economy to its growing population, there are plenty of reasons why you should consider investing in this city. With its low cost of living, diverse culture, and good returns on investment, Atlanta is one of the best places to invest in real estate in the United States. Here are the top reasons why you should consider investing in this city.
The market had a total sales-to-total listings ratio between 0.12 and 0.2. On average, homes in Atlanta, GA sell after 73 days on the market. The trend for median days on market in Atlanta, GA has gone up since last month, and slightly up since last year. These housing market trends in Atlanta are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 6. Orlando, Florida Orlando, FL is a tourism and entertainment favorite, because of this, it remains a strong real estate investment destination. Investors have a choice of targeting the long-term residential or holiday markets with their properties. Both offer strong returns. Orlando, Florida is a highly sought-after destination for both tourists and real estate investors. With its warm weather, a bustling economy, and world-renowned attractions, Orlando offers a number of compelling reasons to invest in its real estate market. Orlando's strong tourism industry, growing job market, affordable cost of living, thriving business community, and a growing population all make it one of the best places to invest in real estate. With a wide range of investment opportunities available, from rental properties to commercial real estate, Orlando is a market that real estate investors can't afford to ignore. Here are some of the top reasons why Orlando is one of the best places to invest in real estate:
The market had a total sales-to-total listings ratio between 0.12 and 0.2. On average, homes in Orlando, FL sell after 72 days on the market. The trend for median days on market in Orlando, FL has gone up since last month, and slightly up since last year. These housing market trends in Orlando are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 7. Tampa, Florida Tampa, FL is also on the list of best places to invest in real estate. With a population of more than 4 million, Tampa, FL is not only an attractive metropolitan area but is also one of the most frequently visited tourist destinations. Tampa, Florida is a thriving city that has been experiencing steady growth in terms of both population and economic development. It is one of the best places to invest in real estate, due to its growing population, strong economy, affordable cost of living, thriving tourism industry, access to the beach, investment opportunities, and favorable climate. With so many factors working in its favor, it's no wonder that Tampa is a popular destination for real estate investors. Here are the top reasons why Tampa is one of the best places to invest in real estate.
The market had a total sales-to-total listings ratio between 0.12 and 0.2. On average, homes in Tampa, FL sell after 70 days on the market. The trend for median days on market in Tampa, FL has gone up since last month, and slightly up since last year. These housing market trends in Tampa are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 8. Spokane, Washington There are several reasons why Spokane, WA is considered one of the best places to invest in real estate. These include its affordable Spokane housing market, strong rental demand, growing economy, and abundant outdoor recreational opportunities. Additionally, the city has a thriving arts and culture scene, a variety of educational institutions, and a low cost of living, all of which make it an attractive destination for both residents and investors alike. Here are the top reasons why Spokane is one of the best places to invest in real estate.
The market had a total sales-to-total listings ratio between 0.12 and 0.2. On average, homes in Spokane sell after 69 days on the market. The trend for median days on market in Spokane has gone up since last month, and slightly up since last year. These housing market trends in Spokane are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 9. Chicago, Illinois Chicago is also on our list of the best places to invest in real estate. Chicago is the third-largest metropolitan area in the U.S., with almost three million in Chicago and another ten million in the surrounding metro area. Chicago has a large population, a diverse economy, and a stable market. Chicago's strong rental market, thriving downtown, presence of well-developed infrastructure, blue-collar areas with high rents, large population, investment opportunities in revitalizing neighborhoods, affordable housing, investment in public transportation, and thriving start-up culture make it an attractive destination for real estate investors. Here are the top reasons why Chicago is one of the best places to invest in real estate.
The market had a total sales-to-total listings ratio below 0.12 which favors buyers. On average, homes in Chicago sell after 73 days on the market. The trend for median days on market in Chicago has gone up since last month, and slightly down since last year. These housing market trends in Chicago are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 10. Austin, Texas Austin, TX is also on our list of best places to invest in real estate. The Austin real estate market isn’t as big as Dallas, San Antonio, or Houston. Austin is only the fourth largest city in the state. However, the Austin housing market is sizable – it is the eleventh largest city in the U.S. as of this writing, and it is the center of a large metro area. Austin has come up as another tech hub in the last 5 to 6 years. There are tons of high-paying tech jobs that moved to Austin in the last couple of years. As Austin is a young city by many standards, Millennials will be the largest buying force in Austin in 2023, and this trend should continue in the coming years. This is going to be more attractive for the areas being close to neighborhood amenities and close to shopping & hang-out spots. Real estate industry experts think that there is no bubble. Austin’s economy is strong and varied. Overall there is a huge scarcity of homes for sale in Austin. It just hasn’t kept up with the pace of people moving here. Here are the top reasons why Austin is one of the best places to invest in real estate.
The market had a total sales-to-total listings ratio below 0.12 which favors buyers. On average, homes in Austin sell after 62 days on the market. The trend for median days on market in Austin has gone down since last month, and slightly down since last year. These housing market trends in Austin are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 11. Columbus, Ohio Columbus is also on the list of the best places to invest in real estate. Its strong economy, diverse job market, affordable housing, and growing population as some of the key factors that make it an attractive destination for real estate investors. Additionally, Columbus's well-developed infrastructure, revitalizing neighborhoods, and thriving start-up culture, provide ample investment opportunities for those looking to invest in the city's real estate market. Here are some top reasons why Columbus, Ohio is one of the best cities to invest in real estate:
The market had a total sales-to-total listings ratio below 0.12 which favors buyers. On average, homes in Columbus sell after 46 days on the market. The trend for median days on market in Columbus has gone up since last month, and slightly up since last year. These housing market trends in Columbus are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 12. Lakeland, Florida Lakeland, FL also enters the list of the best places to invest in real estate in 2023. Florida is one of the most popular states for real estate investing, and Lakeland is a hidden gem in the Sunshine State. Located in the heart of Central Florida, Lakeland is a rapidly growing city with a strong economy, a thriving job market, and a growing population. With affordable housing, a strong rental market, and a low cost of living, Lakeland offers real estate investors the significant potential for long-term growth and profitability. Here are the top reasons why Lakeland, Florida is one of the best cities to invest in real estate.
The market had a total sales-to-total listings ratio below 0.12 which favors buyers. On average, homes in Lakeland sell after 83 days on the market. The trend for median days on market in Lakeland has gone up since last month, and slightly up since last year. These housing market trends in Lakeland are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 13. Ocala, Florida Ocala, FL finds itself on the list of the best places to invest in real estate in 2023. Ocala, Florida is a small but growing city that offers plenty of opportunities for real estate investors. Known for its beautiful natural landscapes and historic downtown area, Ocala has become a popular destination for retirees, young families, and outdoor enthusiasts alike. In recent years, the city has experienced significant economic growth, thanks in part to its diverse industries, including healthcare, education, and manufacturing. Here are the top reasons why Ocala is one of the best cities to invest in real estate:
The market had a total sales-to-total listings ratio below 0.12 which favors buyers. On average, homes in Ocala sell after 85 days on the market. The trend for median days on market in Ocala has gone up since last month, and slightly up since last year. These housing market trends in Ocala are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 14. Birmingham, Alabama Birmingham, AL also ranks in our list of the best places to invest in rental real estate in 2023. The Birmingham AL real estate market continues to take steps in the right direction. Birmingham, Alabama is a growing city that offers many opportunities for real estate investors. Known for its rich history, cultural diversity, and economic growth, Birmingham is quickly becoming a top destination for both new residents and businesses. Overall, Birmingham offers a combination of affordability, economic growth, and cultural attractions that make it an excellent city for real estate investors looking to maximize their returns. Here are the top reasons why Birmingham is a great city to invest in real estate:
The market had a total sales-to-total listings ratio below 0.12 which favors buyers. On average, homes in Birmingham sell after 60 days on the market. The trend for median days on market in Birmingham has gone up since last month, and slightly up since last year. These housing market trends in Birmingham are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 15. Durham, North Carolina Durham, NC is also one of the best places to invest in rental real estate in 2023. The Durham housing market has made considerable improvements since the housing bubble burst. Only two years after the market crash in 2008, Durham was considered one of the few favorable locations to invest in real estate. With strong population growth and a solid economy, the rental demand in Durham, North Carolina is continuously increasing. Durham, North Carolina is a rapidly growing city that offers a strong economy, diverse population, and thriving cultural scene. Here are the top reasons why Durham is a great city to invest in real estate:
The market had a total sales-to-total listings ratio between 0.12 and 0.2. On average, homes in Durham sell after 69 days on the market. The trend for median days on market in Durham has gone up since last month, and slightly up since last year. These housing market trends in Durham are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 16. Charlotte, North Carolina Charlotte is also one of the best places to invest in rental real estate. The Charlotte metropolitan area or Metrolina has experienced rapid population and job expansion. One reason for this is the city's business-friendly environment. The homebuyers in the Charlotte area have dealt with a persistent seller’s market, which has shrunk inventory and driven up home prices. Charlotte, North Carolina is a thriving city known for its diverse economy, vibrant culture, and attractive quality of life. It is the largest city in North Carolina and the second-largest city in the Southeastern United States, making it a hub for business, education, and entertainment. Here are the top reasons why Charlotte is a great city to invest in real estate:
The market had a total sales-to-total listings ratio between 0.12 and 0.2. On average, homes in Charlotte sell after 70 days on the market. The trend for median days on market in Charlotte has gone up since last month, and slightly up since last year. These housing market trends in Charlotte are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 17. Colorado Springs, Colorado Colorado Springs is also on the list of the best places to invest in rental real estate. Colorado Springs, Colorado is a vibrant city located at the base of the Rocky Mountains. With a growing population and strong economy, Colorado Springs offers a variety of opportunities for real estate investors. Here are some top reasons to consider investing in the Colorado Springs real estate market:
The market had a total sales-to-total listings ratio below 0.12, which favors sellers. On average, homes in Colorado Springs sell after 115 days on the market. The trend for median days on market in Colorado Springs is flat since last month, and slightly up since last year. These housing market trends in Colorado Springs are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 18. Denver, Colorado Denver, Colorado also makes the list of the best places to invest in real estate. Rentals in this city have been gradually increasing over the years. This consistent growth has been driven by a buoyant economy creating jobs. Tourism is also high, driving strong returns in the holiday rental market. Jobs are a major reason why people move to Denver in the first place. Denver is a bustling city that is quickly growing in popularity, attracting an influx of residents and businesses to the area. That explains why Denver is one of the top cities for in-migration, attracting people from all over the state as well as the country. With a thriving economy, stunning scenery, and a range of amenities, Denver is a great place to invest in real estate. Here are the top reasons why:
The market had a total sales-to-total listings ratio below 0.12, which favors buyers. On average, homes in Denver sell after 134 days on the market. The trend for median days on market in Denver has gone up since last month, and slightly up since last year. These housing market trends in Denver are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 19. Raleigh, North Carolina Raleigh is also on the list of best places to invest in rental real estate. Raleigh, North Carolina is a city on the rise, offering a thriving economy, a strong job market, and top-tier amenities. The Raleigh metropolitan area – the city and its surrounding suburbs – account for about one and a half million people. Raleigh offers a range of attractive qualities for real estate investors, including a strong job market, a growing population, affordable real estate prices, top-tier universities, a thriving cultural scene, access to outdoor recreation, and a growing tech industry. These factors make it a great location for real estate investors looking to capitalize on the city's potential for growth and maximize their returns. Here are some of the top reasons to invest in the Raleigh, North Carolina real estate market:
The market had a total sales-to-total listings ratio above 0.2, which favors sellers. On average, homes in Raleigh sell after 63 days on the market. The trend for median days on market in Raleigh has gone down since last month, and slightly up since last year. These housing market trends in Raleigh are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 20. Phoenix, Arizona Phoenix is also on the list of best places to invest in rental real estate. It is becoming a top destination for people living in high-cost areas like Los Angeles & Seattle. Phoenix is a rapidly growing city that has become an attractive market for real estate investors. With a strong and diverse economy, a growing population, and a range of amenities, Phoenix offers many opportunities for those looking to invest in real estate The Phoenix real estate market offers many opportunities for investors looking to capitalize on the city's strong economy, growing population, and range of amenities. With affordable housing, high rental demand, and a range of investment opportunities, Phoenix is a market worth considering for real estate investment. Here are the top reasons to consider investing in the Phoenix real estate market:
The market had a total sales-to-total listings ratio between 0.12 and 0.2, which favors none. On average, homes in Phoenix sell after 78 days on the market. The trend for median days on market in Phoenix has gone up since last month, and slightly up since last year. These housing market trends in Phoenix are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. 21. Seattle, Washington Seattle too makes our list of one of the best places to invest in real estate for those who can afford it. Seattle offers strong economic prospects and a buoyant labor market. This means that rental occupancies are expected to remain high. The city’s population has grown consistently over the last few years with families drawn to the city’s lifestyle. Housing prices have doubled in the past five years, growing twice as fast as the national average since 2016. Seattle’s tech landscape and real estate market are rapidly evolving. Google has upped the size of its new Seattle campus. Facebook has been on a hiring spree in the Seattle area, particularly for its virtual reality arm Oculus, which is growing fast in Microsoft’s backyard of Redmond. GeekWire reported on new HQ leases for top Seattle startups Rover and Outreach. Other companies continue to grow and that will pick up any slack. Tech has blown up Seattle. For the past 5 years, we have seen that this market has priced out many middle-class buyers. Despite the high cost of living, Seattle, Washington, remains a hotbed for real estate investment. The city's strong economy, growing job market, and attractive location make it an ideal choice for investors looking to capitalize on the city's steady growth. Overall, Seattle's strong economy, growing population, limited housing supply, high-quality education, attractive location, and stable market make it a top choice for real estate investors looking for a reliable and profitable investment opportunity. Here are the top reasons why investing in Seattle's real estate market may be a wise decision:
The market had a total sales-to-total listings ratio between 0.12 and 0.2, which favors none. On average, homes in Seattle sell after 75 days on the market. The trend for median days on market in Seattle has gone up since last month, and slightly up since last year. These housing market trends in Seattle are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. Now that you know where to invest in real estate, it's time to figure out how to do it properly. One of the best investments you can make is in income-producing rental properties, but only if you know what you're doing. We can help you succeed by avoiding risk and boosting profit by researching top real estate growth markets. Foreign Investment in US Real Estate: A Look at the Latest Data Foreign individuals and corporations are free to purchase residential or commercial real estate in the United States. Real estate is a global asset class, and foreign investment in the US real estate market has been an important source of capital for many years. The National Association of Realtors® (NAR) publishes an annual report on international transactions in US residential real estate to provide insights into the trends and patterns of foreign investment. Let’s take a closer look at the latest data. Dollar Volume of Foreign Buyer Residential PurchasesAccording to the NAR report, the dollar volume of foreign buyer residential purchases during April 2021-March 2022 was $59 billion, which is equivalent to 2.6% of $2.3 trillion of the dollar volume of existing-home sales. This indicates that foreign investment in US real estate continues to be significant. Number of Foreign Buyer Existing-Home PurchasesThe report also reveals that 98,600 foreign buyer existing-home purchases were made during April 2021-March 2022, which represents 1.6% of 6.06 million existing-home sales. This demonstrates that foreign buyers are still active in the US real estate market. Interestingly, the report found that 57% of foreign buyers who purchased US residential property were already residing in the United States. This includes recent immigrants (less than two years at the time of the transaction) or non-immigrant visa holders who reside for more than six months in the US for professional, educational, or other reasons. Top Foreign BuyersThe report also lists the top foreign buyers in the US residential real estate market. The top five countries are Canada (11% of foreign buyers, $5.5 billion), Mexico (8% of foreign buyers, $2.9 billion), China (6% of foreign buyers, $6.1 billion), India (5% of foreign buyers, $3.6 billion), and Brazil (3% of foreign buyers, $1.6 billion). Colombia also makes the list with 3% of foreign buyers and $1.0 billion. Implications for the US Real Estate MarketForeign investment has been a key driver of the US real estate market, and the latest data from the NAR report suggests that this trend is likely to continue. Foreign buyers are attracted to US real estate for a variety of reasons, such as economic and political stability, a strong rule of law, and a relatively low cost of living compared to other developed countries. These factors make the US an attractive destination for foreign investment. Furthermore, foreign investment can provide significant benefits to the US real estate market. For example, it can boost economic growth, create jobs, and increase demand for US goods and services. However, foreign investment can also have its downsides, such as driving up home prices and reducing housing affordability for US residents. In summary, the latest data on foreign investment in US real estate from the NAR report highlights the ongoing importance of foreign buyers in the US real estate market. While there are potential benefits and drawbacks to foreign investment, it is clear that the US real estate market remains an attractive destination for global capital. References:
 Navigating interest rate disruption in CRE, bank and hospitality execs on the state of lending, Trepp’s April CMBS report, and office buildings are ripe for multifamily conversion Navigating Interest Rate Disruption in Commercial Real Estate The inflation rate has cooled some as mid-2023 approaches, allowing the Fed to slow the pace of its rate hikes. But for many, the damage is done, with the fallout still reverberating, especially in commercial real estate (CRE). An ebook from PwC—“Navigating interest rate disruption: How real-time data can facilitate better CRE decisions amid volatility”—provides an overview of the CRE market and some advice on how to manage through. The report looks into a combination of factors, including economic and geopolitical forces, the ripple effects of Covid, increased construction costs, inflation, and more. Sections of the 9-page report (with excerpts) include:
 Six Bank and Hospitality Executives Discuss the State of Lending Amid Bank Failures
Lenders and hospitality executives at the 2023 Meet the Money national hotel finance and investment conference commented on the current state of the banking crisis. Six of their comments were published in Hotel News Now: Ash Patel, president and CEO, Commercial Bank of California; Alan Reay, president, Atlas Hospitality Group; Matt Mitchell, vice president, Hall Structured Finance; Bruce Lowrey, managing director of investments, CIM Group; Matt Bailly, vice president of real estate, Prospera Hotels; and Keegan Bisch, vice president of originations, Stonehill. Read their comments here. For more from the conference, see this article from CoStar: “Five Key Takeaways on Hotel Investment from Meet the Money Conference.” For more on how bank failures could make hotel financing harder to find, click here. CMBS Delinquency Rate Holds Steady in April, But Office Rate Continues to Rise This is an excerpt from Trepp’s Delinquency Report (May 3). To access the full report, click here. “The Trepp CMBS Delinquency Rate held steady, but the segment that everyone continues to watch closely saw its rate move higher again in April 2023. The Trepp delinquency rate was unchanged in April at 3.09%. Declines in the retail, lodging, and multifamily rates offset a small increase in industrial loans and a bigger increase for offices. “Office remains the most heavily watched part of the market as firms look to aggressively reduce space. Sublease space is at or near record highs in many markets as demand from big tech firms has eroded sharply. In addition, many companies are letting leases expire or are renewing for smaller footprints. “Last week, Microsoft announced it would offer up several hundred thousand square feet in Seattle. The tech bellwether has already announced plans to relinquish more than two million square feet in that city. One in Three Office Buildings in Major North American Cities Could Be Ripe for Multifamily Conversion The combination of 1) companies (especially tech firms) continuing to lay off people by the tens of thousands, 2) the ongoing shift to working from home, and 3) the current U.S. housing shortage has caused landlords across the country to seek innovative ways to fill their millions of square feet of empty space. “Up to 34% of office buildings in 14 major North American markets could be potential candidates for adaptive reuse. Looking at more than 26,000 buildings, office to residential conversions could open the door to potential housing for thousands of families in as many as 8,996 properties,” according to global commercial real estate advisor firm Avison Young. “Adaptive reuse is an important conversation we are having around the art of the possible, to demonstrate how this potential solution contributes to placemaking and to the revitalization and vibrancy of our neighborhoods—particularly our downtown cores,” said Sheila Botting, Principal and President, Professional Services, Americas at Avison Young. “We must reimagine how we want to live, work and play. Adaptive reuse is one of the key components of how we do that as a community.” For more, click here. Kaufman Development is buying Franklinton’s Idea Foundry, the largest makerspace in the world5/20/2023
 Kaufman development’s massive Franklinton development project, Gravity, has a massive new acquisition to its name. The Idea Foundry, a 65,000 square foot former factory located at 421 W. State St. billed as “the largest makerspace in the world”, will be purchased by Kaufman, to become part of the Gravity community. Gravity’s second phase, which is currently under construction, is located across State Street from the Idea Foundry. Created in 2008 by Alex Bandar, the Idea Foundry moved to its current Franklinton location in 2014. Today, it houses more than 500 entrepreneurs and makers, and is home to a litany of state of the art tools like laser cutters and 3D printers. According to a press release, Kaufman will purchase the Idea Foundry from owners Nancy Kremer and Christopher Celeste. Bandar will continue to operate the space, which will now be backed by Kaufman’s resources.
“Kramer and Christopher took a scrappy, grassroots community of makers, put us in a rocket ship and launched us. Now, Kaufman is refueling us to take us even higher,” Bandar said in a press release. “There is already so much synergy between The Idea Foundry and Gravity, and this will allow us to amplify and accelerate our growth and impact in remarkable ways. This takes us from being a space for creatives to being a district for creatives, with opportunities that will be unique to any makerspace in the world.” Gravity tenants will have access to the Idea Foundry under the change in ownership, and the space could see a variety of potential new additions, such as building out the Foundry’s basement, rooftop and parking lot, creating an artist-in-residence and entrepreneur-in-residence programs, and creating pop-up spaces for artists and makers.  Nation's Biggest Mall Landlord Steps Up Efforts To Diversify, Transform Its Retail Centers Simon Property Group, the nation's largest mall owner, expects to spend roughly $1.5 billion building 2,000 multifamily units and hotel rooms as it looks to add density and expand some of its retail properties in new ways.
The Indianapolis-based landlord estimated it will have construction of the projects completed over a five-year span, CEO David Simon said Tuesday on a first-quarter earnings call. He discussed the real estate investment trust's pipeline of apartments and hospitality properties while pointing to what he described as the company's successful redevelopment of Phipps Plaza in Atlanta, a mall that now has a Nobu hotel and restaurant and Life Time fitness center on its site. Mall owners around the nation have been diversifying and adding density to their centers, bringing in nontraditional retail uses to help drive foot traffic and to take the place of vacant anchor tenant space and unused surface parking lots. And now Simon Property is stepping up its efforts on that front. “We have several densification projects under construction and a pipeline of identified projects," David Simon, who is also the company's chairman and president, told Wall Street analysts. "Now that’s not going to happen overnight, but that’s going to happen over the next few years," he said. "So that to us is a real opportunity.” Simon Property expects to start work on several of these projects this year, but the CEO said the REIT is "frankly being a little bit cautious." Simon said, "We’re still permitting some things in California and the Northwest. So we’re going to just see how the world is." Plans for Texas, California and Florida Asked about the cost of the multifamily units and hotel rooms, Simon said it is hard to isolate them from overall mall redevelopment efforts. "But my instinct would be probably about a billion and a half dollars. ... Somewhere in that range" for the construction, he said. The CEO didn't offer too many details. But he said some of the residential units are planned for Austin, Texas; Orange County, California; and Seattle. In terms of hotels, they will be headed for Florida, as will some residential units, according to Simon. “It’s kind of where you would expect it to be, where supply and demand is in our favor,” he said. The REIT is also considering building a hotel on Cape Cod, Massachusetts, because there would be a demand for it there, according to Simon. The CEO didn't specify which malls, if any, the 2,000 units would be built and added to. But Simon did refer to the reimagining of Phipps Plaza in the Buckhead section of Atlanta. "As we give back real estate through our redevelopment efforts, the big focus is on where we can add some mixed uses, because we do think that what we did in Buckhead is having a tremendous impact on the overall value of that real estate,” Simon said. Possible Joint Ventures There are several ways the company could finance the construction, according to the CEO. “I think we will do selective [joint ventures] on certain of the residential development," Simon said. "And it also may be that we could potentially bring in third-party equity, too. We’ll look at each deal individually. But that’s certainly a possibility.” Last October, Simon Property acquired a 50% stake in developer Jamestown as it looks to expand and wring new revenue from its portfolio by diversifying its shopping centers. Jamestown has been involved in landmark projects such as Chelsea Market in New York City. The CEO also said leasing demand is strong at Simon Property's malls and that the properties are getting a boost because tourism is coming back. |
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