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Don’t forget— if you want more strategies about door-knocking, negotiating, networking, closing deals, and a dozen other topics, you can get our Essential Real Estate Toolkit by referring this newsletter to just one other person (use the share link below).

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- James and David

Why home flippers are starting to struggle

While the housing correction isn’t a deal-breaker for most buyers and sellers, there’s one group of buyers taking a particular hit: home flippers. Between rising interest rates and lagging prices, they’re finding it increasingly difficult to sell at a profit.

• In Q2, 8.2% of transactions were home flips, down from the record share of 9.7% of transactions in Q1.

• In Phoenix alone, home flipping activity has already fallen 60% since Q1

• Flippers who continue to buy in boomtown cities, including Phoenix, Austin, and Boise, are expected to take the biggest hit as home prices normalize over the coming months

Our take

Home flipping is challenging to say the least. Days on market are your worst enemy when it comes to turning a profit. In a transitional market, especially when buyers have more negotiating power, house flipping becomes less appealing. If you are going to flip homes in this type of market, be sure to have a trustworthy contractor and familiarize yourself with the comps in the area.

Long-term impact of Hurricane Ian

Not only did Hurricane Ian devastate parts of Florida, the storm is likely to have an impact on the state’s housing market for months to come.

• Thousands of homes in Key West, Naples, Fort Myers, and Sanibel Island are now uninhabitable, leaving tens of thousands of residents displaced

• Across Florida, rent jumped over 30% YoY. For residents now in need of a new place to live, the median rent is already over $1,700 a month and likely to keep climbing

• Less than 20% of the homes in evacuated counties have flood insurance, which means these homeowners will have to cover their own repair and rebuilding costs out of pocket. That takes hundreds of homes out of the housing supply while increasing demand in these areas.

Our take

Our hearts absolutely break for the people impacted by this storm. It’s just shocking how much damage Hurricane Ian caused, physically and financially. There’s no easy solution for this kind of devastation, but our peers in Florida have told us that the community is rallying together and people are lending their support to one another. To everyone that has been affected, we are sending you some strength.

Top 10 cities with the biggest price drops

Realtor.com listed the top 10 cities where home prices have dropped the most between June and September. These are cities that initially saw a huge influx of buyers from expensive metros who were looking for affordable homes, but where prices are now dropping due to inflation and rising mortgage rates.

Here are the top 10 cities that have had the steepest percentage drop in prices:

1. Austin, TX (-10.3%)

2. Phoenix, AZ (-9.9%)

3. Palm Bay, FL (-8.9%)

4. Charleston, SC (-8.6%)

5. Ogden, UT (-8.6%)

6. Denver, CO (-8.0%)

7. Las Vegas, NV (-7.9%)

8. Stockton, CA (-7.7%)

9. Durham, NC (-7.5%)

10. Spokane, WA (-7.4%)

Our take

We’re coming out of one of the most unusual and unpredictable times in the history of our industry. Now that the market is normalizing, these cities were bound to be affected first. Home prices there were simply unsustainable. However, they're still relatively high. When working with sellers, be sure to price homes appropriately as the shift from a seller’s to a buyer’s market has clearly happened in a majority of markets.

Schematics

The news that just missed the cut

• Billionaire TV mogul Byron Allen just bought this $100M Malibu mansion

• What Blackstone sees for global real estate in 2023 and beyond

• Before you buy rental real estate, read this!

• The shared-home broker Pacaso just laid off 30% of its staff

• In Dallas and Austin, some agents are scrambling for listings

• These are the 10 safest and unsafest cities right now

Foundation Plans

Advice from James and David to win the day

Here are three common negotiation strategies by our friends over at Broke Agent Media that can help you get a better deal for your buyers:

• Ask the builder to cover closing costs. When it comes to new properties right now, builders are willing to do just about anything to close the deal before interest rates rise further.

• Back up your number with local comps. Provide as much justification as possible for the price you’re trying to get. Provide comps and local data to back up your number. The listing agent may brush over your research, but it’s always worth a shot!

• Be willing to walk away. If the seller just won’t budge and your buyer doesn’t love the house enough to compromise, it’s okay to walk away from the deal. In this market, inventory is loosening and competition is falling. Another amazing deal will come!

The Blueprint Spotlight

Want to connect with Tom? Follow him on Instagram @tomtoole3rd

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

Take the time to enjoy yourself this weekend, you've earned it!

See you on Tuesday.

-James and David

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