Mobile Home Park Investments Cap 10%

Good morning, Dwellers! Welcome to another edition of Dwellings Digest, a realtor and investor driven newsletter simplifying real estate, exploring the economy-stock-real estate link, adding a fun twist with niche topics and more. Enjoy!

Quote of the day - Success in real estate doesn’t come from selling properties; it comes from understanding markets, people, and the stories behind every deal.

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Rates & REIT’s

Average going rates as of Aug 27th 2024

Numbers as of Aug 27th 2024 closing

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🎢 Impact on Real Estate

Home Prices Hit a New Record High in June but Show Signs of Slowing Growth

1. Home Price Growth Slows Amid Economic Uncertainty

• Despite home prices reaching record highs, the latest S&P CoreLogic Case-Shiller Index shows a 5.4% annual growth rate in June, down from 5.9% in May. This deceleration reflects growing concerns over inflation, rising interest rates, and affordability challenges.

2. Rising Mortgage Rates Squeeze Buyer Confidence

• With mortgage rates hovering around 7%, the cost of borrowing is limiting purchasing power, leading to a forecasted slowdown in home price growth to 4.6% for 2024. Buyers, especially first-timers, are feeling the pressure, contributing to a more cautious market.

3. Entry-Level Homes Lead Price Growth

• Entry-level homes are seeing the fastest price increases, with 75% of markets showing low-tier homes outpacing overall market growth. In Atlanta, for example, lower-tier homes have risen 18% faster than mid- and high-tier properties, highlighting strong demand despite affordability concerns.

“Even though the number of homes on the market for sale trails 2017 to 2019 levels by 30%, the number of home sales has remained quite low”.

🎙️ RE Spotlight

Zombie Foreclosure Rate Continues to Decline in Q3 of 2024

• Only 7,007 zombie foreclosures were recorded in Q3 2024, accounting for just 0.05% of the 1.4 million vacant homes nationwide. This reflects a stable housing market, with zombie foreclosures representing just one in every 14,776 homes, down from one in 11,565 last year.

• Foreclosure activity dropped 29.3% year-over-year, with 222,934 properties in foreclosure in Q3 2024, down from 290,000 the previous year. This decrease highlights the impact of strong homeowner equity and effective mortgage negotiations, reducing the number of properties entering foreclosure.

• Among the 36 million investor-owned homes in the U.S., 2.6% are vacant, with states like Indiana (5.5%), Oklahoma (4.6%), and Alabama (4.4%) leading the pack. This trend suggests that investor-owned properties are more susceptible to vacancies compared to owner-occupied homes.

‘Organized Chaos’ of New Compensation Rules Benefits Residential Real Estate

• The shift to direct communication of buyer agent compensation and mandatory signed agreements has led to a 30% increase in daily calls and emails for agents, highlighting the industry's rapid adaptation to these regulations.

• Buyer brokers now operate with 100% transparency, requiring signed agreements that clearly outline compensation. This change encourages agents to better define their value proposition, ensuring clients understand the services they’re paying for upfront.

• Initial feedback indicates a 20% increase in buyer hesitation to sign agreements before touring homes. However, education and clear communication have proven effective, with 85% of buyers ultimately agreeing after thorough explanations.

As Rental Costs Surge, Cities Fund More Affordable Housing for the Middle Class

1. Middle-Income Housing Demand Surges Amid National Housing Deficit

• With a national housing shortfall ranging from 1.5 million to 7 million residences, state and local governments are increasingly targeting middle-income families, now struggling to afford rents even with household incomes as high as $156,000 in cities like Denver.

2. New Housing Programs Bridge Gap for Middle-Income Renters

• Michigan’s initiatives, such as the $110 million Missing Middle Housing Program, have successfully funded developments for families earning between 60% and 120% of the area’s median income, creating homes with rents reduced by up to $800 per month.

3. Balancing Middle-Income and Low-Income Housing Needs

• Colorado's new tax credits and bond financing for up to 3,500 middle-income homes show the state’s effort to balance support between middle and low-income families, addressing housing costs that have outpaced income growth by over 50% in some areas over the last decade.

🏕️ Niche-RE

Do Mobile Home Parks Offer the Highest Yields in Real Estate?

• Exceptional Yields: Mobile home parks offer starting capitalization rates of 10%+, outperforming apartments (7%) and retail properties (6%), making them a top choice for yield-focused investors.

• High Operating Margins: With operating margins of 35%-42%, mobile home parks significantly surpass traditional apartments, which typically range from 55%-60%, driving more profit to investors.

• Low Tenant Turnover: Enjoy stability with mobile home parks, where annual turnover rates are just 10%-15%, compared to over 60% in traditional multifamily housing, ensuring consistent cash flow.

The world of mobile home park investing is ripe with potential for those willing to do their homework, embrace the challenges, and seize the opportunities.

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🖼️ Chart-Tastic

🤪 Fun for the Road

Real estate is serious business, but that doesn’t mean we can’t have some fun along the way! Let’s celebrate the wins and enjoy a little humor with our new section, 'Fun for the Road,' featuring real estate fun just for you.

And…that's a wrap on this edition!

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