Market Watch: Top Headlines in SFR
DTLA vacancy rates soar to the highest in 17 years, flip rates have plateaued, and Amazon announced their search for a city to home HQ2, their second headquarters location. It’s important that investors stay engaged in the industry, especially given the rapidly evolving nature of SFR.
These three headlines made waves this month in the SFR realm and may have significant impacts on investors in the space. Downtown Los Angeles has hit a 17-year high vacancy rate, peaking to 12% compared to the citywide rate that hovers around 4%. According to the Laist, supply is now outpacing demand as more and more luxury apartments are constructed in DTLA. Due to new zoning permits, high-rises are going up and subsequently so are rents. Reaching alarming rates, rents have now exceeded those in Bel-Air and are three times higher than the rest of the LA metro area. Even with move-in specials and generous concessions, new apartment buildings are still sitting with extremely high vacancies while homelessness reaches double digits. If investors are able to source deals in the surrounding areas, they heighten their chances for low vacancy and maximized rents where luxury new builds are taking over and pushing locals out of the area.
Industry news outlet, Think Realty, recently published a piece outlining the flattening percentage of flips happening in the residential investment space. This year in Q2, over 53,000 single-family homes were flipped across the country, down 6.9% from the last year. The decrease could be linked to the declining foreclosure inventory. Flippers are now looking to lower priced areas, often with strong rental markets, where there is demand from other investors seeking a turnkey solution. Top flip markets for investors to watch include Colorado Springs, Denver, Boston, Providence and San Diego. Surprisingly, California is one of the best places in the country for flip returns but remains a challenge due to the lack of affordable inventory.
Last but not least, Amazon’s released the markets they are considering for expansion. HQ2 will bring a $5 billion investment in construction, according to Business Insider. The expansion will include relocating 50,000 employees and opening up thousands of new jobs. Over 50 cities spanning the entire US and even parts of Canada have submitted their bids to house the new headquarters. Investors should follow this expansion, as the city Amazon lands in will have a significant influx of new residents in need of affordable housing. Chicago, Minneapolis, Toronto, San Diego, Dallas, Denver and Pittsburgh are just a few cities Amazon has its eyes on for the next place to call home.