His Capital Group

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His Capital Group

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His Capital Group


The pandemic driven home buying frenzy, cheap debt and an insatiable urge to move certainly created one hell of a profit cocktail for investors. However, the year ahead may very well seem like the morning after, though it will take more than alka seltzer, a cheeseburger & shake to get rid of the hangover. 2023 may play out in complete reverse of 2022.  Sluggish and slow out of the chute & maybe backfiring a little like Uncle Buck’s car (apologies if you don’t get the movie reference).  Then we may see things stabilize in the second half of the year if not by Spring. 

That said, it always depends on what or whose lens you’re looking through and what level “player” you are. The old saying “if all the economists in the world were placed end to end they still wouldn’t reach a conclusion” is still spot on. Your job is to determine how to use the data to help you figure out what strategy will serve you best. To weather the storm you’ll really need to be dialed in.  Rather than a deep dive into myriad numbers, let’s skip the minutiae & take a look at some of the prevalent topics:

Foreclosures: Man oh man the gurus preaching the next foreclosure storm are in full social media bloom. Numbers from Attom Data and Auctions.com show less than 1% of homes are in foreclosure vs the 4% at the peak of the 2008 crisis & 93% of them have equity.  For perspective, over 875 thousand homes were lost to foreclosure from 2008-2009. We might experience a little more than 10% of that in the coming year, possibly two. Mortgage delinquencies are actually lower than they were prior to the COVID-19 pandemic, and foreclosure activity is running at about 60% of where it was in 2019. So most troubled homeowners will experience a soft landing by selling before losing it to auction. Contrarily, 90% of loan servicers expect vast foreclosure activity. 

Throw in the fact that Auction sales hit almost 70%, meaning a lack of REO’s for rehabbers to acquire. (also contrary to what many pundits have forecasted) Considering Flip profits have declined yet again, this doesn’t bode well for those executing this strategy exclusively. Wholesaling, as well as, holding for rental is where the savvy flipper trends. 

Home Prices: As always it depends on which market you are in. Redfin predicts an additional 4% decline while the National Association of Realtors anticipates no movement. San Francisco, Vegas, & Phoenix might see noticeable drops (Scottsdale is already experiencing negative absorption) while Chicago, Milwaukee & Pittsburgh are seeing steady upticks. Freddie Mac expects property prices to continue their moderation and “could see slight declines in the year ahead given the expected rise in cap rates leading to slower transaction volume. Based on inflation and Treasury rate hikes slowing, they expect fewer transactions given the negative leverage situation, supporting the idea that investors are waiting for the market to reach an equilibrium. The year end numbers reflected year over year home sales were down 35% @ the end of November 2022. 

Interest Rates: While rates are not directly tied to the Fed’s actions, they are influenced by them. Frankly our team is betting we’ll see them hover at around 6% then we may see a drop by summer 2023. The Fed continues to try and break the economy which should show us all how resilient it has been. You can say the markets are betting there’s an 80% chance the Fed strategy will work and we will have a recession. The question is, what if the 20% that doesn’t work happens? There’s a lot of hope that the strategy will work, but it’s not certain. And that uncertainty will result in volatility. Thus far the result of inflation and the Fed’s hike of interest rates has been extreme stock market volatility and significant investor losses.

The mortgage industry is taking it on the chin as it has exited the largest refi boom in U.S history as originations were down over 30% from last year! There were several rounds of layoffs cutting thousands of underwriters, processors and loan officers.  Better.com & Loandepot were hit hard.  Finance of America shut down its mortgage division to focus on reverse mortgages, while First Guaranty & Sprout closed their doors. The MBA expects mortgage originations will decline an additional 14% year over year to $1.9 trillion in 2023. Their view shows: tighter monetary policy and more restrictive financial conditions causing a recession in the first half of the year. They expect mortgage rates will be 5.2% in December 2023.

Multi-family lending will slow.  While the funds rate isn’t directly tied to mortgages, it is reflected in what lenders charge. Why? Because Lenders borrow money, too. Private/Hard Money is no different here. It’s currently not uncommon to see a 680 credit score or better to get a refi. 

New Home Construction: US census data reflects builders pulled back in 2022 as housing starts were down 16%  and building permits were down 22% year over year.  Rob Dietz chief economist for the National Association of home builders is expecting housing starts to drop another 15-20% in 2023. The SFR housing market downturn has seen everyone from mom-and-pop landlords to Blackstone-owned Home Partners of America pull back on plans to acquire more homes. 

As of June 2022, multifamily construction hit a historic high of 841,000 units under construction nationwide, according to the National Multifamily Housing Council and the National Apartment Association. In September, the number of multifamily housing starts rose 16.5% year over year & the number of multifamily permits pulled rose 25.5% year over year, to a rate of 644,000.

Looking at these numbers, this prediction certainly appears to be on the right track. However, with interest rates taking a toll on developers, the number of multifamily units authorized but not yet started has also increased, jumping 33.3% year over year in September to a seasonally adjusted annual rate of 144,000.

Construction lending has sort of slowed to a crawl, the whole market has seized up, and institutional investors are taking a pause right now on new opportunities. Census data lead us to believe multifamily housing starts are probably going to be down 40% year over year in 2023, could very well be the same for the single family market.

What’s Ahead for Renters: From the beginning to the end of November, rents saw the sharpest 3 month drop since 2017. National median rent is now $1356 per month and the perspective is renters will have more options in 2023 than they have in quite some time. Rental construction was up 18% in 2022 though that will slow significantly this year. Class B products will outperform Class A due to the significant price differential.  

Master Planned Communities: The 500+ communities surveyed felt significant supply and demand pressure throughout 2022, with development delays bottlenecking builders’ lot supply and rising mortgage rates pricing out many buyers. However, each of the top 50 sold at least 338 new homes falling shy of the 460 per community sold in 2021. Florida commanded the Top 50 ranking with 12 of the top 25 best-selling communities, 3 of them exceeding 1,000 new home sales: The Villages, Lakewood Ranch, & Silverleaf master plans. How can you leverage their success?


5 points for investors to always review & consider:

  1. Rates/Fed Actions
  2. Supply/demand: imbalance some areas like Scottsdale AZ showing negative absorption/too many units available yet way over in Buckeye, AZ they have supply but no demand as its too far away from Phoenix.
  3. Risk premium 10yr treasury bond vs RE:  it was 1% (Bonds) vs 10% (RE) now bonds are at 10% RE is 8% or less (yield premium)
  4. Income level: types of jobs & income level.  Can they afford to live where you’re buying/building?
  5. Cost per door does it make sense? 

Always Remember This:

What you’ll need to reach the next level:


 Numbers, trends and cycles are important to pricing for sure. But, numbers and the economy only drive a portion of deals available. The intelligent investor doesn’t worry about the ups and downs; whatever the numbers, people don’t change. People still move; they still become empty-nesters, they still die; they still get divorced or retire no matter what’s going on in the economy. 


To learn more about the profitable strategies HIS Capital is employing to thrive during this turbulent “season” contact Sam Ally @ 407-494-3329 or via s.ally@hiscapitalgroup.com 

2 Responses

  1. One of the best no bias … no run for the hills 🤣 information on real estate and true trending insights! Thx

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