MReport October 2020

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58 | M REPORT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Opportunity Zones That Are Ripe for Investment Researchers have created a standardized score to compare every opportunity zone in the U.S. to determine which areas would yield the highest average return on investment. E leven neighborhoods across seven states and the District of Columbia have been named by ATTOM Data Solutions and the proptech firm CityBldr as possessing the best potential for using Opportunity Zone tax benefits to economically revive low-income communities. The Opportunity Zones were created in the 2017 Tax Cut and Jobs Act. The 11 communi- ties cited in the new ranking were identified by ATTOM and CityBldr were chosen based on a data analysis that identified them as "mostly-impoverished, densely- packed urban neighborhoods" that could generate "some of the most attractive opportunities in the nation for housing developers to take advantage of federal reinvest- ment tax benefits." The neighborhoods cited in this ranking are, in alphabetical order: • Anacostia, South Shore, and City Heights in the District of Columbia • Buckman/Kerns in southeastern Portland • Central District in eastern Seattle • Hilltop in central Tacoma, Washington • Mid-City in central Los Angeles • North End/New Center in northern Detroit • Parramore in west-central Orlando • Spartan Keyes in eastern San Jose • West Colfax in western Denver Median household incomes in these 11 neighborhoods range from $20,205 in Tacoma's Hilltop area to $57,009 in the Spartan Keyes section of San Jose, and all are beneath the national poverty level of $61,937. The neighborhoods' population densities far exceed the national average of 93 people per square mile and all have poverty levels that are higher than the national rate of 13.1%. Furthermore, between 53% and 98% of households rely on rental housing in these areas, compared to 36% nationwide. However, the housing markets in these communities are mostly solid: the typical home sells for more than the national median home price in eight of the 11 areas. "This data tells us that housing developers should consider investing in these neighborhoods because they have an immense amount of potential, plus tax benefits aimed at realizing that potential," said Bryan Copley, co-founder and CEO of CityBldr. "What we've done with this study is create a standardized score to compare every opportunity zone in the United States to determine which areas would yield the highest average return on investment." "Factoring in home values and how they've done in the past year adds a critical piece of data to the picture," added Todd Teta, Chief Product Officer with ATTOM Data Solutions. "Developers can get a demographic snapshot of what these areas look like, plus the hard numbers on how home prices are changing." Housing Shortage Reaches More Affordable Cities Some of the more densely populated and pricier areas reportedly are seeing more homes on the market. But fierce competition among buyers has driven up home prices. F orty of the nation's top 50 metro areas have reported a decline in housing supply since February, according to new data released by Redfin. Among the most dramatic examples of metros witnessing an evaporating housing inventory are San Antonio, which found its number of homes for sale down 21% year over year in July—back in February, the Texas city recorded a 1% uptick in available homes for sale—and Baltimore, which also saw a 21% year-over-year declines. Three metros—Frederick, Maryland; Newark, New Jersey; and Chicago—each saw 20% de- creases from one year earlier. However, some of the more densely populated and pricier areas are seeing more homes on the market, most notably the San Francisco metro area with a 51% year-over-year spike in July after having dropped 2% in February. Other notable increases were found in New York City (up 13%) and San Jose (up 7%). Nationwide, the fierce competi- tion among buyers has driven up home prices, which climbed 8% year over year to a record high of about $323,000 in July. Redfin agent Dan Borowy said he's seeing this play out in the Baltimore area. "Buyers are willing to pay more for a house than I've ever seen— I'm talking $30,000 to $50,000 over the listing price, compared with maybe $5,000 or $10,000 over before the pandemic," he said. "They're desperate because homes are flying off the market so quickly. I'm selling all of the homes I'm listing within three days." Redfin attributed the overall sharp decline in inventory to record-low mortgage rates encour- aging a new wave of homebuy- ers coming into a market where supply is nowhere near the level of demand. And rising home prices has not bothered would-be buyers. Further exacerbating inven- tory woes is the growing trend of homeowners who are staying longer in their residences, with no eagerness to relocate. And com- plicating matters is the financial strain of the COVID-19 pandemic, which has sparked an increase in relocations—mostly away from expensive coastal markets to more affordable inland areas. Still, this is not an abrupt de- velopment, with Redfin acknowl- edging a lack of significant new home construction in the years following the 2008 financial melt- down. But that situation might be changing: Residential construction projects in the United States in July were up by 23.4% compared to the previous year while build- ing permits rose by 9.4% to a seasonally adjusted annual rate of 1.5 million. "Builders got burned big time during the housing bubble, but they're finally starting to climb out of the hole as homebuyer de- mand rebounds, which is a good sign for U.S. housing supply," Redfin Lead Economist Taylor Marr said. "What remains to be seen is whether lumber producers, which are facing slowdowns due to the pandemic, will be able to keep up."

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