Monday Morning Quarterback

Investor Sara McDaniel moved to Minden, Louisiana in 2016 and fell in love with the city. She also saw potential to expand her real estate investing business. In 2020, a childhood friend contacted McDaniel about a property they owned and asked if she was interested in buying it. The property in question was eight villa-style apartments that had been abandoned for almost 40 years. Two of the villas are about 750 square feet and six of them are 500 square feet. “The villas weren’t my first rodeo with abandoned properties,” McDaniel tells CNBC. “But this project really pushed my skill set and really pushed me to the next level.” At the time, McDaniel already owned over 20 properties in the Minden area in the form of short-term rentals, long-term rentals and vacant land. When McDaniel acquired the property the ceilings were caving in. McDaniels, 47, had joined the Financial Independence Early Retirement, or “FIRE movement,” and started saving about 50% of her income in her early 30s with the intent to invest in real estate and retire early. She bought “The Villas at Spanish Court” apartments in 2021 for $51,306 — using the savings she had accumulated. “I saw the potential that real estate had to give me a life of freedom and flexibility,” McDaniels says. “I was very confident when we closed the deal but it wasn’t long thereafter that I literally started having panic attacks, wondering what in the world did I get myself into.” The ceilings on the old apartments were caving in and some even had bullet holes in the windows. And only after closing the deal, did McDaniel realize she’d “made a rookie mistake” by not getting an environmental hazard assessment. The process includes testing properties for substances like lead, mold, radon and asbestos. “Come to find out they are filled with asbestos and lead paint,” she says. The Villas at Spanish Court had been sitting abandoned for 40 years. Like most people would do, McDaniel turned to Google for answers. There she learned of the Brownfield Cleanup Revolving Loan Fund from the Louisiana Department of Environmental Quality. The fund provides low-interest loans with flexible terms to help with the environmental cleanup of vacant and under-utilized properties. McDaniel was able to secure a $46,731 LDEQ loan with 0% interest rate. She was also able to secure an interim construction loan from a local bank for $202,725 and got a permanent mortgage of $290,710, which she used to pay off the interim loan and finish construction. 18 months later, the villas were fully restored and renovated at a final cost of $729,885. Now, McDaniel has a monthly mortgage of $3,298 and is paying back the LDEQ loan in $400 monthly payments. By 2023, the villas were booked for about 1,000 nights through Airbnb. Just a year later, that number increased to 1,300 at an average of $143 a night. The villas brought in $224,133 in revenue in 2024. Sara, you are an inspiration to all investors! In other real estate investor news, let’s get under the hood…

The World’s Happiest Countries in 2025. The world’s happiest country has managed to keep its No. 1 ranking for eight years running. While Finland once again tops the “World Happiness Report” rankings, the United States (at No. 24) earned its lowest ranking yet in the 2025 report. The 13th edition of the annual report marks the United Nations International Day of Happiness on March 20. In the United States and parts of Europe, declining happiness and social trust have contributed significantly to the rise of political polarization and votes against “the system,” the report finds. But in brighter news, global research shows that people are much kinder than we expect. “People’s fellow citizens are better than they think they are, and to realize that will make you happier, of course, but it’ll also change the way you think about your neighbors,” said John Helliwell, a founding editor of the World Happiness Report. “And so you’re more inclined to think of a stranger in the street as simply a friend you haven’t met and not somebody who poses a threat to you,” said Helliwell, who is an economics professor emeritus at the University of British Columbia. There’s “room for improvement,” Helliwell said, in believing that we’re all part of a larger group that looks out for each other. It’s an important source of happiness that we haven’t properly tapped, he said. The report draws on Gallup World Poll data from people in more than 140 countries. Countries are ranked on happiness based on their average life evaluations over the three preceding years, in this case 2022 to 2024. The report is a partnership of Gallup, the Oxford Wellbeing Research Centre, the UN Sustainable Development Solutions Network and an editorial board. When it comes to happiness, the Nordic countries are clearly doing a lot of things right. For the eighth year in a row, Finland is the world’s happiest country, with its neighbors clustered close behind. “Nordic countries like Finland continue to benefit from universally available and high-quality health, education and social support systems. Inequality of wellbeing is also low,” said Ilana Ron-Levey, managing director at Gallup. Finland, Denmark, Iceland and Sweden (the top four) remain in the same order as 2024. And Norway is again No. 7. While social support systems that look out for residents’ welfare are important to Finland’s No. 1 ranking, the people play a role too, according to Helliwell. A less materialistic mindset may also work in Finland’s favor, Helliwell said. Two Latin American countries (Costa Rica at No. 6 and Mexico at No. 10) both enter the top 10 for the first time in the 2025 report. Both countries’ residents have “strong social networks and strong perceptions about the direction of their economy and confidence in leaders and institutions,” Ron-Levey said. The Netherlands (No. 5), Israel (No. 8) and Luxembourg (No. 9) fill out the top 10. At the bottom of the list are Afghanistan (No. 147) once again last on the list. Sierra Leone (No. 146), Lebanon (No. 145), Malawi (No. 144) and Zimbabwe (No. 143) make up the rest of the bottom five for happiness. And Syria is sooo bad it's not even on the list.

Home Flipping Declines Again Across U.S. in 2024. ATTOM property data released its year-end 2024 “U.S. Home Flipping” Report, which shows that 297,885 single-family homes and condos in the United States were flipped in 2024. That was down 7.7 percent from 322,782 in 2023 and down 32.4 percent from a recent peak of nearly 441,000 reached in 2022. The report further reveals that as the number of homes flipped by investors declined, so did flips as a portion of all home sales, from 8.1 percent in 2023 to 7.6 percent last year. In one small potential bright spot for the home-flipping industry, profits and profit margins rose slightly in 2024 on typical buy-renovate-and-resell projects. But margins again remained at one of their low points over the past 10 years as investors continued struggling to take advantage of the nation’s housing market boom. Gross profits on typical home flips in 2024 increased to $72,000 nationwide (the difference between the median sales price and the median amount originally paid by investors). That was up from $67,846 in 2023 and translated into a 29.6 percent return on investment compared to the original acquisition price. “The home-flipping industry saw investors shy away even more in 2024 amid the extended period of languishing profits. But even as activity waned, there was at least a glimmer of hope that returns were starting to turn around,” said Rob Barber, CEO at ATTOM. “While home flippers still seemed to be having difficulty timing the market for big profits, their margins at least stopped going in the wrong direction.” Among metropolitan areas with a population of 1 million or more and sufficient data to analyze, those with the highest percentage of flipped homes in 2024 that had been purchased by investors with financing included San Diego, CA (59 percent); Seattle, WA (58.1 percent); Fresno, CA (50.6 percent); Providence, RI (49.9 percent) and San Francisco, CA (49.9 percent). In that same group, the metro areas with the highest percentage of flips purchased with all cash included Buffalo, NY (81 percent); Cleveland, OH (77.4 percent); Detroit, MI (76.5 percent); Birmingham, AL (75.7 percent) and Pittsburgh, PA (73.8 percent).

Housing Starts Rebounded in February. After unusually cold weather and fires held back homebuilding in January, new home construction rebounded sharply in February, rising to a 1.501 million annualized rate and topping even the most optimistic forecast from economics groups surveyed by Bloomberg. The gain was broad-based with both single-family and multi-family increasing, and three out of four regions contributing. But despite the big jump, starts are still down 2.9% compared to a year ago, while permits for new builds are down 6.8%, and both have been hovering around levels reminiscent of 2019. It appears that part of the reason why homebuilding has lagged of late is due to builders focusing on completing projects. Home completions declined 4.0% in February, but the 1.592 million annualized pace was faster than any month from 2020-2023. Moreover, completions have run above a 1.5 million pace (economists’ estimation of annual homes needed to keep up with population growth and scrappage) in eleven out of the last twelve months. With strong completion activity and tepid growth in starts, the total number of homes under construction has declined 14.8% in the past year. That type of decline is usually associated with a housing bust, but economists don’t see that happening. With the brief exception of COVID, the US has consistently built too few homes almost every year since 2007. As a result of the shortage of homes, we think housing is far from a bubble and expect housing prices to continue higher in 2025 in spite of some broader economic headwinds.

Climate Risk is Rising. Kara Ng of Zillow reports that trillions of dollars in U.S. residential real estate are at significant risk from climate-related hazards such as fire, flood, and extreme wind. Homes with major wind risk alone are valued at $17 trillion, fire-risk homes at $9.1 trillion, and flood-risk homes at $7 trillion. As you would expect, our very own Los Angeles tops the list for highest-value fire-risk properties ($831 billion), while New York and Miami lead in flood and wind risk exposure. Additionally, the analysis highlights how these climate risks pose long-term threats to household wealth, with at-risk home values equating to as much as 13.5 years of cumulative income in vulnerable metros like Los Angeles. Zillow’s research also shows homes with high climate risk increasingly struggle to sell or command lower prices, underscoring growing market sensitivity to environmental dangers. Andrew Freedman of Axios reports that climate change could wipe out $1.47 trillion in U.S. real estate value, driven primarily by rising insurance premiums and shifting consumer demand away from high-risk regions. According to a new analysis by First Street, metro areas like Miami, Jacksonville, Tampa, New Orleans, and Sacramento are projected to see the steepest increases in insurance costs. The report also predicts a wave of climate-driven migration, with over 55 million Americans expected to relocate to safer regions by 2055. While the findings highlight severe risks to property values and population stability, they also suggest potential growth for climate-resilient areas in the North and East. In a separate Zillow analysis, Kara Ng also reports that homes with extreme flood and fire risks face increasing market challenges. These properties are less likely to sell and more likely to sell at a discount. In June 2024, only 52% of high-flood-risk homes sold compared to 71% of low-risk homes, and flood-prone properties typically sold for 6% below the initial list price. High fire-risk homes also saw lower sales rates, though the impact was less severe. Despite high-risk areas often commanding higher list prices due to desirable locations, mounting concerns over insurance costs, financing hurdles, and natural disaster risks are making buyers more cautious, particularly in flood-prone regions like Florida, Texas, and Alabama.

Get Out of the House! Parents, I have bad news! The post-pandemic trend of young adults moving out of their parents' homes has slowed, amid a housing market challenged by elevated mortgage interest rates and the worst rental affordability conditions on record. According to NAHB analysis of the 2024 American Community Survey, the share of adults ages 25 to 34 living with parents or parents-in-law in 2024 was 19.2%, or approximately 8.5 million people. In contrast, less than 12% of young adults lived with their parents in 2000. Looking at the numbers regionally, the elevated shares of young adults living with parents in higher-cost coastal areas point to prohibitively expensive housing costs as one of the reasons for keeping young adults in parental homes. Multi-generational living, which is more prevalent among ethnic households, can also contribute to the elevated shares of young adults living with parents. This is particularly relevant in the Southern states, where there are higher shares of Hispanic households. Meanwhile, the share of older workers in the U.S. has grown significantly since the turn of the century, with 29.5% of workers in 2023 being at least 65 years old, compared to 23% in 2000, according to a new report from the Employee Benefit Research Institute (“EBRI”). This shift occurred as labor force participation by older Americans between the ages of 55 and 64 surpassed pre-pandemic levels, while the rate for those 65 and older remained unchanged, the data suggested. "The movement of the Baby Boom generation out of the age groups younger than 65 has made the composition of the older workforce even older," said Craig Copeland, director of wealth benefits research at EBRI, in the report. "At the same time, the older workforce is becoming more diverse, as a smaller share of White Americans comprise the ages 55 or older population." Copeland added, "These are important considerations for employers to understand, as older workers and a more diverse workforce calls for additional or new answers to the optimal design of employee benefit plans." Key findings of the full report include that labor force participation rates of men ages 60 to 64 increased in 2022 and 2023, while the rate among those ages 75 and older declined. Similar increases were observed among women between the ages of 55 to 59 and 70 to 74, but participation decreased for women in the 60-64 age bracket in 2023.

Human Cannonball Hurt After Missing His Target. His job description is “human cannonball.” And for 23 years that seemed to be working out for Chachi “The Rocketman” Valencia. Even his wife, Robin Valencia, is in the human-cannonball line of work. But last month at the Riverside County Fair & National Date Festival, one could see why being a daredevil isn’t for the faint of heart, as the Rocketman, alas, missed his target. The performer is recovering from his injuries after bouncing off a safety net during a performance at the Indio festival. But it could have been worse, much worse! Valencia began his performance around 2:30 p.m., fair officials said via Instagram. He routinely pumps up the audience with a 20-minute speech before climbing into a cannon. Valencia was launched about 65 feet high at 55 mph across a distance of 165 feet — where a narrow net was set up to catch him. The net is about 20 feet off the ground, according to his website. But instead of delivering a final heartfelt salute to the crowd, Valencia missed the net and smashed into the ground after a gush of wind shifted his landing onto the asphalt. Ouch! Valencia suffered broken ribs, a broken wrist and a lacerated liver, according to a GoFundMe fundraising page. He was rushed to a hospital around 3 p.m. The performer underwent surgery, but Valencia injuries were not life-threatening. Valencia says on his website that he has more than two decades of experience as a human cannonball. He performed at the closing ceremony of the 2012 Summer Olympic Games in London and at the 2014 Carnival festival in Rio de Janeiro. Human cannonballs are said to be a small and select group. But they are no strangers to catastrophe. After the death of one performer in 2011, a daredevil told the British online outlet the Independent that it’s a skill that requires the performer “to understand physics, mathematics and engineering” — and “you can’t be scared of anything.”

FIX & FLIP WORKSHOP. Saturday, March 29, 2025, 9:00 am to 6:00 pm. (and bonus session on Sunday at an actual rehab.) Learn how to find, finance, fix, and flip houses. Los Angeles County Real Estate Investors Association, at the Iman Cultural Center, 3376 Motor Avenue, Los Angeles, CA 90034. The cost of the workshop is $349.00 per person. Gold members can attend for free. Register: www.LARealEstateInvestors.com.

This Week. Investors will continue to watch for additional information about tariff policies. For economic reports, New Home Sales and Consumer Confidence will come out on Tuesday. Personal Income and the PCE price index, the inflation indicator favored by the Fed, will be released on Friday.

Weekly Changes:

10-Year Treasuries: Fell 010 bps

Dow Jones Average: Rose 100 points

NASDAQ: Fell 200 points

Calendar:

Tuesday (3/25): New Homes Sales

Tuesday (3/25): Consumer Confidence

Friday (3/28): Core PCE

For further information, comments, and questions:

Lloyd Segal

President

Los Angeles County Real Estate Investors Association, LLC

Lloyd@LARealEstateInvestors.com

310-792-6404