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Real estate investors remain confident in 2023

A new report by New Western says the year will favor local investors with skills and knowledge of their neighborhoods

New Western, a marketplace for fix-and-flip residential properties, released a report that found investors remain confident going into the new year, despite challenges like low housing inventory and high mortgage rates that the housing market currently faces.

According to the report, 73% of investors said their business grew from 2021 to 2022 and 70% said they are planning to invest this year.

Among those surveyed, 63% of investors who plan on buying for the first time in 2023 said interest rates are not high enough for them to reconsider buying, with 59% of them intending to use cash or “private money” to make a purchase.

The report says the exit of iBuyers like Redfin and Zillow will give local mom-and-pop investors more opportunities and that higher rates mean a fix-and-rent strategy could be more strategic than fix-and-flip.

It also notes the impact of Gen Z and millennials on the housing market. There is growing interest in investing among younger cohorts, although Gen Z respondents (86%) said they are waiting for mortgage rates to stabilize before entering the investment market.

According to the report, the top three challenges investors face are finding deals, the cost of labor and funding. With so little inventory to choose from, investors are increasingly picking up older homes to restore.

“These are homes the average home buyer won’t touch,” the report says. “Homes purchased through New Western that are later renovated sell for 31% less than new retail homes for sale in the same market.”

Per the report, investors are losing interest in pandemic boomtowns like Denver, Nashville, and Austin, where volume of homes sold declined after the second quarter of 2022. Instead, metro areas like Raleigh, Oklahoma City and Tulsa saw an increase in year-over-year demand from New Western investors.

Kurt Carlton, president and co-founder of New Western, noted how market pressures are influencing how investors operate.

“We know there will not be enough new builds to close the gap, while the exit of iBuyers from the investor market will open up a surplus of options for individual investors to scoop up deals and provide inventory by rehabbing existing homes,” Carlton said.

The analysis from New Western is based on sales data and survey answers from 886 real estate investors across the U.S. who were at least 18. The company conducted the investor survey in November 2022.