The financial world is buzzing with anticipation following the Federal Reserve’s recent choice to keep interest rates steady. While market analysts largely predicted this move, the unexpected twist came from Fed Chair Jerome Powell, who hinted at a possible three-rate drop in 2024. This surprising announcement has ignited curiosity and raised questions about its potential impact on real estate portfolios, particularly for investors seeking to navigate the evolving landscape.

Understanding the Fed’s Decision

At its year-end meeting, the Fed chose to halt interest rate hikes, keeping short-term rates within the 5.25% to 5.5% range. Powell’s assurance of scaling back on rate increases indicates a shift in monetary policy heading into 2024.

Predictions suggest a more relaxed atmosphere for mortgage rates, offering potential relief for aspiring homeowners and investors with Debt Service Coverage Ratio (DSCR) portfolios. The positive outlook is supported by housing economists, pointing towards a favorable period ahead.

Optimistic Trends

Powell’s traditionally hawkish stance has taken a surprising turn, signaling a potential end to the rate hike cycle. This shift has implications across investments, causing yields on 5-year and 10-year Treasuries to contract. For investors monitoring DSCR loan pricing, these changes align with future rate trajectories that could enhance investment opportunities.

Real estate investors eager to refinance may encounter challenges due to tight inventory, affecting affordability. Despite these hurdles, a buoyant selling season is anticipated, especially for flippers, who could benefit from reduced refinance rates on investment properties.

Taking a skeptical view, Powell’s dovish turn raises questions about potential political motivations, especially considering the upcoming 2024 election. Active investors should consider this factor when speculating on medium-term market conditions.

Investor Sentiment

Positive sentiments fueled by Powell’s reassuring foresight may prompt previously hesitant investors to enter the market. Temporary dips in transaction volumes are attributed to elevated rates rather than distress, aided by the liquidity from COVID-era stimulus funds.

While a modest 25 basis points dip occurred, predicting a return to pre-pandemic interest rates of 3-5% seems unlikely. Investors should prepare for a new normal of higher interest rates and adjust their strategies accordingly.

Refinancing Opportunities for DSCR Portfolios

For investors with DSCR portfolios, the present is an opportune time to refinance and secure lower rates. The market’s desire for rate reductions could lead to unforeseen developments.

While an immediate surge in real estate sales is not expected, a potential boom may unfold in the next 60 to 90 days. The affordable housing segment is poised for price increases due to limited inventory and high demand, presenting an opportunity for buyers to act quickly.

Exit Strategies and Market Engagement

Pressure on flipper margins underscores the importance of robust risk management. Investors may need to reconsider their exit strategies, shifting from quick flips to potential long-term rentals.

Financial institutions are exercising caution, influencing the pace of re-engagement with the market. Investors should monitor these shifts as they can impact portfolio decisions.

The Bottom Line

Real estate investors must strike a balance between cautious optimism and prudent skepticism considering the recent Fed decisions. While the landscape is evolving, taking informed steps such as monitoring interest rate trends and seizing refinancing opportunities is crucial for securing investments. Armed with knowledge, foresight, and a blend of caution and courage, investors can navigate the changing real estate landscape successfully.

Amid declining property values in a tight lending environment, all-cash buyers will benefit from bargain pricing, CBRE predicts in its latest outlook.

CBRE expects an economic slowdown in the U.S. next year that will impact commercial real estate with bank lending remaining tight throughout 2024, investment volume decreasing 5 percent, cap rates expanding and property values declining.

But the U.S. may be able to avoid a recession and interest rates should be reduced later in the year as activity picks up in the second half of 2024, according to the firm’s 2024 U.S. real estate outlook.

Property types with relatively strong fundamentals, including demand, vacancy and rent growth, like industrial, retail, multifamily and data centers will be most favored by investors in 2024, according to CBRE.

Richard Barkham, CBRE global chief economist & global head of research, said in prepared remarks there is still some more pain ahead for the commercial real estate industry in 2024, including overall investment volumes remaining down for the year. But he expects an upturn by the second half and overall leasing activity to pick up as well. He notes stabilization and the early stages of recovery are also not far off.

North America dry powder by strategy. Chart courtesy of CBRE

With inflation easing, the Federal Reserve is expected to begin reducing short-term interest rates in 2024, possibly to around 4.25 percent by the end of the year and to 3.5 percent in 2025.

There should be buying opportunities in the first half of 2024, especially for all-cash buyers like sovereign wealth funds, pension funds and endowments. CBRE expects the lowest pricing for assets will occur in the first two quarters.

The report notes increasing cap rates, which have risen by about 150 basis points between early 2022 and late 2023 depending on the market and asset type, imply a 20 percent decline in values for most property types. For office, the increase was higher, rising by at least 200 basis points.

“We think cap rates will expand by another 25 to 50 basis points in 2024, with a corresponding 5 percent to 15 percent decrease in values,” the report states.

CBRE expects real estate values for most property types will likely not stabilize before mid-2024.

Historical & forecast cap rates. Chart courtesy of CBRE

Office vacancies to peak

The outlook expects another tough year ahead for the office market with office vacancy peaking at nearly 20 percent in 2024, up from 18.4 in the third quarter of 2023 and 12.1 percent at the end of 2019.

CBRE notes a slowing economy in the first part of 2024 and increasing acceptance of hybrid working arrangements will continue to limit office demand next year. The 2023 U.S. Office Occupier Sentiment Survey found more than half of the respondents planned to further reduce their office space in 2024.

Companies looking to lease less than 20,000 square feet will account for most of the leasing activity, according to CBRE. Leasing activity should rise by 5 percent in 2024, however that is still 20 to 25 percent lower than pre-pandemic levels.

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READ ALSO: How Incentives Boost Office Conversions

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Meanwhile, the flight-to-quality trend should continue with occupiers seeking space in newer, prime office properties with the best amenities. But office construction levels will be at their lowest levels since 2024, which could result in a shortage of that sought-after Class A space later in the year. CBRE forecasts that average prime office asking rent will increase by as much as 3 percent.

On the investment side, the higher-for-longer outlook for interest rates will cause some owners of Class B and C office assets to sell due to further erosion in values. Many of those older buildings that lack modern amenities will continue to struggle to attract tenants, so a higher percentage of older office assets are likely to be converted to other uses. While office conversions can be challenging, the report notes the federal government is providing grants, low-interest loans and tax incentives and local governments are also offering incentives.

Not all office markets are suffering, and the outlook shines a light on several active cities in the U.S. In Nashville, Tenn., where absorption and rents are up, demand for new office space is expected to remain strong. Miami is seeing one of the highest rent increases in the country and the vacancy rate is dropping as new-to-the market tenants are keeping the market healthy. Las Vegas has seen an uptick in leasing activity and strong preleasing at speculative projects, putting the market in a strong position heading into 2024.

Industrial sector slowdown

The industrial sector should see net absorption similar to 2023 levels and rent growth moderating to 8 percent. Construction deliveries are tapering off and expected to continue to slow down due to economic uncertainty, tight lending conditions and oversupply in some markets.

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READ ALSO: Property Management Success: How AI Boosts Industrial

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Vacancy is expected to hit 5 percent by mid-2024, up from 4.2 percent in the third quarter of 2023 but decrease later in the year due to the decline in new construction. Looking ahead, CBRE is forecasting a 7.5 percent increase in U.S. industrial production over the next five years as more occupiers improve their supply chains by adding more import locations and onshoring or nearshoring of manufacturing operations. Markets to watch include Austin and San Antonio in Texas; Nashville; Salt Lake City and Central Florida.

Retail’s declining availability

The retail sector is also facing a lack of new construction. That will contribute to retail availability rates dropping by 20 basis points next year to 4.6 percent. Asking rent growth is expected to drop below 2 percent for most of 2024 but go above 2 percent by the fourth quarter.

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READ ALSO: Mixed Shopping Cart for Retail

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Open-air suburban retail centers will see demand grow faster than other retail formats and neighborhood, community and strip centers will have stable occupancy throughout the year. Look for traditional mall-based retailers to seek other new formats outside the malls for expansion. Texas markets are expected to see more luxury brands. Other markets to watch include Orlando, Fla.; Charlotte, N.C.; Denver; San Francisco and Orange County, Calif.

AI to fuel increased data center demand

The data center market is seeing growth, often driven by advances in cloud-based solutions, artificial intelligence and other new applications and technologies. CBRE notes demand will continue to be higher than supply and construction in major markets will exceed 3,000 MW in 2024, up from the company’s 2023 estimate of 2.500 MW. Markets to watch include Austin; San Antonio and Omaha, Neb.

https://www.commercialsearch.com/news/what-to-expect-for-cre-in-2024/

Before getting into my predictions, the chart above is indicative of the mixed signals in the economy. Prices are rising on cardboard due to increased consumer demand. How is demand for cardboard rising if consumer spending is slowing along with inflation?  The answer to this question is key to predicting what happens in 2024.

On the real estate front, the beginning of the year started out good but as interest rates rose substantially volumes dropped off a cliff and prices began falling.  What do the changes mean for residential and commercial real estate in 2024?  Will prices have a larger reset than we are already seeing?

2024 will finally be a big reset in real estate

Regardless of prices, real estate is already in a deep recession, with closing volumes down close to 20 year lows.  At the same time interest rates are remaining above 7.5% (as of this writing).  Late 2023, we started to see the beginning of what is to come in 2024 with values finally starting to come off their epic run in most cities throughout the country.

Three factors that will shape real estate in 2024

Before getting into my predictions for next year, there are three crucial factors to discuss that will shape the real estate market in 2024 and beyond: Interest rates, inflation, and consumer sentiment. All three are intertwined as they influence each other, but it is important to discuss each one individually to understand how each unique variable will influence real estate in 2022 and beyond.

Inflation:

Inflation continues to run at almost 2 times the Federal reserve target of 2%.  There should be some break in the continued price acceleration as supply chains “catch up” with demand.  Furthermore, we are seeing in the latest retail numbers that prices are starting to dampen demand a little, which will help.  Unfortunately, there are a few categories that will remain elevated for a while: housing and wages that will factor into the price of goods.

Housing:  As rates have almost tripled from their lows, housing has gotten considerably more expensive due to financing costs.  Furthermore supply continues to be reduced due to the lock in effect.  Remember housing makes up over 30% of the CPI calculation.

Wages also look to continue higher as the work force remains constrained either from retirements or others not reentering the work force for several reasons.  For example, as inflation and wages increase, so does childcare costs which makes it more difficult for many to justify working if they are spending close to what they are making on childcare.  I do not see this issue getting resolved until possibly late 23 which will lead to continued upward pressure on wages, but likely not as much as in 2022 as demand wanes a little.

Interest rates:

The Federal reserve finally came around that inflation is not transitory and as a result they accelerated the wind down of their bond purchases which will put them in a position to pause hiking rates into 2023.   The market has picked up the inflation fight for the fed with long term yields finally heading higher even without additional federal reserve hiking.

Some are predicting a quick reversal in the fed next year.  I do not see this happening as they are forced to hold rates higher for longer due to the stickiness of inflation and huge deficit spending that further increases pressure on yields. The early indicators of rising cardboard prices is a warning that the road ahead will be bumpy on inflation.   These factors will keep mortgage rates in the 6-7% range in 2024.

Consumer Sentiment

Even with huge inflation and predictions of a downturn, the consumer keeps spending.  I think late 23 the consumer starts to get “tired out” and will eventually slow spending down as they work through built up pandemic savings.  This should help slow inflation, but will not lead to a quick reversal.

The recent bank collapses are a wildcard.  So far, the contagion seems to be isolated, but if this spreads consumer confidence will take a large hit.

Multiple macro wildcards to watch in 2024

2024 is a hard year to predict as rates remain high there is increasing probability of something breaking in the economy.  Here are some factors I am watching:

1. Deficit spending/financing: The federal deficit has basically doubled over the last 3 years and all of this must be financed through the treasury market.  As the treasury continues its borrowing rates could continue to spike.  I see no end in site to the current deficit spending which will lead to rates higher for longer
2. Interest rates/inflation: I’m not convinced that we are totally done with inflation, the labor market is still exceptionally strong which will continue upward pressure on wages and in turn products/services.  Rates will have to remain high even in the face of a possible moderate recession
3. What breaks? The federal reserve continues touting a soft landing, in order to accomplish this rates will need to remain higher for longer.  This drastically raises the risk of something breaking.  My first thoughts are commercial real estate and regional banks.  But I don’t think the economy will come out of the high rate environment unscathed.

How the three factors above play out could have substantial implications on real estate, for example if something in the economy breaks bad enough like commercial real estate, we could enter a recession with higher unemployment than anticipated.  My gut says that rates will stay higher for longer due to the tight labor market and increased deficit spending which ultimately will put pressure on commercial and residential real estate prices.

What are my predictions for real estate in 2024?

2024 still looks to be a transition year, but likely will not happen exactly as economists have planned.  Unfortunately, there are more negative than positive risks for real estate heading into the second half of 2024.

In the first half of the year, I do not see the bottom dropping out of prices.  There will be some softening with prices dropping in the 5-10% range, some markets will hold steady while others could still increase further. The real test comes in the second half of the year when consumers exhaust their pandemic savings and the bills come due for all the spending.  

Furthermore interest rates will remain much higher than the market is currently anticipating, which will ultimately lead to a reset in the economy.  

On the commercial side, rising real interest rates will continue to put pressure on cap rates.  Remember that the higher the cap rate the lower the value (they work in inverse to each other.  Office is going to get destroyed with values dropping around 30% overall due to lower demand, higher financing rates, and much higher cap rates.  Retail and Industrial will also come off their highs as cap rates continue to rise to keep up with the rise in treasuries.  Rents will not be able to rise fast enough to compensate for the higher cap rates.

The wild card is what happens late 2024 as higher interest rates continue to dampen demand; furthermore, the federal reserve must hold rates higher for longer which will keep rates from falling back to their lows.  Worst case scenario 10-15% price drops, likely is somewhere under 15% reset in prices.  This will not occur until mid 2024 as the consumer finally comes to terms with increased borrowing costs and slows down their spending. 

Commercial is a different ballgame as  commercial properties are at much higher risk for larger price drops.  For example, large class B office will need a huge reset in prices which could be in the 40%+ range.

Will there be a recession in 2024?

I’m going to put my odds at 75% for a recession in 2024.  As rates remain higher commercial real estate values will plunge which will lead to more bank failures and less lending.  Eventually the lack of liquidity will flow through to consumer spending leading to a slowdown.  Unfortunately, the risks of recession are mounting as there is always a lag in the economy.  Furthermore, I think the market is calling the all clear on inflation a bit too soon and will be in for a rude surprise of higher rates.

Summary:

2024 is going to be a bumpy year in real estate.  We are already seeing signs of this on the residential side with the median prices off 5% in Denver year over year and volumes down 25%. This is just the beginning of the reset in real estate.

Commercial real estate is a whole different animal with rents dropping, vacancy rising, and ultimately prices facing a huge reset especially in the office sector along with multifamily.  If rates remain higher for longer, there will be increasing stress on every commercial property type as cap rates remain elevated.

Anyone in residential or commercial real estate is going to have a tough ride as volumes will stay extremely low throughout the nation until there is a major reset in the economy that forces individuals and businesses to sell and rates to fall substantially.  Long and short 2024 looks like a tough year in real estate that will likely worsen for most compared to 2023.  Fortunately every single cycle creates new opportunities and we can always look forward to 2025

Additional Reading/Resources

• https://www.bloomberg.com/news/articles/2023-11-02/housing-crisis-gets-worse-for-americans-on-mortgage-lock-in-effect?srnd=premium
• https://car-co.stats.showingtime.com/docs/mmi/x/Statewide?src=map
• https://www.wsj.com/business/the-rising-price-of-cardboard-a-positive-sign-for-the-economy-08908d0f

US commercial real estate prices have fallen this year for the first time in more than a decade, according to Moody’s Analytics, heightening the risk of more financial stress in the banking industry.  What property types are declining? (hint not just office properties).  What is the only property type that held in positive territory?  Is the recent drop in prices just a blip or the start of a bigger trend?  Why are prices falling now while the economy continues humming along?

What was in the most recent commercial data?

The recent CoStar report, the leading aggregator of commercial data,  showed declines in Office, retail, and apartments.  CoStar has some of the best insight into commercial property values as they also track heavily via Loopnet (largest commercial MLS)

1. THE PRIME INDUSTRIAL INDEX LED GROWTH AMONG THE FOUR MAJOR PROPERTY TYPES. The Prime U.S. Industrial Index was up 2.5% in the first quarter of 2023 and 10.8% in the 12 months ending in March 2023. The equal-weighted U.S. Industrial Index, including a broader mix of asset qualities, underperformed the Prime Index with a modest decline of 0.1% in the quarter. The Prime Industrial Index was the only Prime property type index to hold in positive territory in the first quarter. 
2. MULTIFAMILY INDEX DECLINES. The equal-weighted U.S. Multifamily Index fell by 2.4% in the first quarter of 2023 and dropped 2.2% in the 12 months ending in March 2023. The U.S. Multifamily Index showed the sharpest annual decline in values since the interest rate hiking cycle began in the first quarter of 2022. Debt for multifamily transactions was plentiful and drove investor demand in the sector. The index appreciated by 2.8% in the 12 months ending in March 2023 in Prime Multifamily markets but fell 2.8% in the quarter.
3. OFFICE PRICE DECLINES CONTINUED IN THE FIRST QUARTER. The U.S. Office Index sagged 2.4% in the first quarter of 2023, taking its cumulative decline to minus 5% during the previous three quarters. Office prices were down 1.4% in the 12 months ending in March 2023, marking the first annual decline since the second quarter of 2012. In addition, pricing growth in the Prime Office Index advanced at a negligible pace of 0.4% in the 12 months ending in March 2023 while slumping 2.8% in the quarter.
4. RETAIL PRICING FOOTED SIDEWAYS IN THE FIRST QUARTER. The U.S. Retail Index rose just 0.2% in the first quarter of 2023 and 3.3% in the 12 months ending in March 2023. The tendency of high-profile pair trends to swing the data around at the top end of retail space can lead to strong quarterly fluctuations. The U.S. Prime Retail Index dipped 2.6% in the first quarter while appreciating 12.3% over the year prior. The three-quarter trend in the Prime Retail Index saw values surge 9.9% in the third quarter of 2022 before giving back 2.8% and 2.6% in the fourth quarter of 2022 and the first quarter of 2023, respectively.

Why is multifamily declining as rents are staying high?

Below I put together a hypothetical analysis of what is occurring in the multifamily sector.  Multifamily was trading at insanely low cap rates while at the same time banking on appreciating rents.  As rents have stagnated or even declined in some markets and interest rates have basically doubled, many apartment deals no longer cash flow and are in trouble.  Furthermore, it is more than likely that a bank holds the note below and that note is now a  big problem for them.  Here is a great article in the Wall Street Journal that shows how this is playing out in real life.

Remember most commercial loans are fixed for 3-5 years and then the rate resets to the market rate (typically 10 year treasury +).  This scenario below is especially difficult:

1. LTV using new cap rate is radically different: No lender today would provide a new loan with the cash flow basically at break even due to the higher rate.
2. Cash flow underwater based on new rate: Assuming the note is current and the lender sold the note, a substantial discount would have to be given to compensate for the ultra-low rate.
3. Even if note is held and renewed a substantial loss would have to be taken by the bank for impairment

Pre Covid
Net Operating Income	$    300,000.00
Value	$ 7,500,000.00	assume a 4 cap
Debt service	$         210,000	5.25m (70% LTV at 4%)
Net Cash Flow	$      90,000.00
Today
Net Operating Income	$    300,000.00
Value	$ 5,454,545.45	assume a 5.5 cap
Debt service	$         315,000	5.25m (70% LTV at 6%)
Net Cash Flow	$    (15,000.00)

Is the recent decline in commercial property values a blip or a trend?

“Lots more price declines are coming,” Mark Zandi, Moody’s Analytics chief economist, said.

The danger is that will compound the difficulties confronting many banks at a time when they are fighting to retain deposits in the face of a steep rise in interest rates over the past year.

Excluding farms and residential properties, banks accounted for more than 60% of the $3.6 trillion in commercial real estate loans outstanding in the fourth quarter of 2022, with smaller institutions particularly exposed, according to the Federal Reserve’s semi-annual Financial Stability Report published last week.

“The magnitude of a correction in property values could be sizable and therefore could lead to credit losses” at banks, the report said.

Summary

The recent declines in commercial properties are not a blip.  They are the beginning of an upcoming cycle with huge resets in prices.  These prices will be most profound in office with big impacts also being felt in larger multifamily.

Based on the current federal reserve predictions, rates will remain elevated at least until around mid-year 2024.  This will exasperate the issue new group of office and multifamily notes come due for a reset leading to cash flow issues in many cases.

The overwhelming majority of commercial loans are held by banks so at the end of the day someone will be taking a haircut that will become self-fulfilling as lenders sit out on new deals due to their own cash flow issues caused by commercial property.  I’m already seeing the credit crunch which will get amplified over the next year with higher rates.

Fed raises rates 2200% The floor on housing prices drops

The real estate party cannot go on forever.  We are in a goldilocks scenario where prices are staying high even in the face of doubling mortgage rates.  Unfortunately, eventually the porridge cools off!    It is not possible with the steep rise in interest rates that there is not a misstep in the economy.    Will the billions in Wall Street money sitting on the sideline waiting for a reset keep housing prices high?  Why is the “floor” on real estate prices dropping?

This real estate cycle is radically different than 2008

This real estate cycle has some stark differences with 2008 and other prior cycles.  Typically the federal reserve raises rates quickly to contain runaway growth and inflation.  In this cycle, the federal reserve waited about a year too late before tapping the brakes which has allowed inflation and consumer spending to become entrenched.

Even as the federal has raised rates from .25% to 5.5% consumers keep buying cars, trips, etc…. keeping inflation well above the federal reserve target.  This strong consumer spending and high inflation changes this real estate cycle.

If we rewind to 2008 along with prior cycles, there was typically some event that led to a reset in prices.  In 2008, the raising of interest rates and large quantities of adjustable rate mortgages led to an enormous drop in real estate prices and a subsequent decline in employment.  The Federal reserve was then able to drop interest rates to help the economy recover.

In this cycle, with inflation running well above targets, dropping rates quickly is not in the cards as the goal is a “soft landing” where employment stays high and consumer spending does not pull back enormously.  Under this scenario interest rates stay much higher for considerably longer as the federal reserve will be hesitant to drop rates to early as inflation could reaccelerate.

Wall Street money puts a floor under real estate

I’ve said for a while that wall street buyers in this real estate cycle would put a “floor” under real estate prices as they deploy billions in capital.  Essentially the theory is that as real estate prices fall, big investment firms like Blackstone and countless others will “feast” on lowered real estate prices as they can buy huge quantities of single family homes for long term rentals.  As they deploy capital this will put a “floor” under real estate prices as their demand will halt too far of a drop in prices.

Federal reserve has changed where the floor is

As mentioned above, in this cycle we will not see a huge drop in interest rates quickly.  As interest rates remain high, the return on Capital that is required also remains high.  For example, if the federal funds rate stays at 5%, basically the risk free rate of investing, then investors will demand a higher rate of return for taking risks.  In this case an investor will require a higher return.  For example they would require a 6 % return or they could invest in other assets like the mortgage market with interest rates on 30 year loans north of 8% (as of this writing).

This rate of return is also known as the capitalization rate (cap rate) in commercial properties.  As wall street firms buy properties they are analyzing them based on their rate of return.

Remember the higher the cap rate the lower the price of the property is (inverse). We are seeing this play out in real life. Invitation, which owns about 83,000 houses, has been selling properties that have appreciated to the point that they are yielding less than 4% and putting the proceeds in the bank, where the cash is earning more than 5%.  (Wall Street Journal)

Prices have to fall substantially more in order to hit the floor

With rising interest rates this means cap rates have increased substantially.  As cap rates remain high the only solution to hit the rate of return is for prices to fall.  Below is an example of of how prices will for a single family home will be impacted by rising cap rates.

As you can see it will take a big price adjustment to get wall street money to move off the sidelines with interest rates remaining high.

Will prices really fall as much as the model above predicts?

I find it highly unlikely that we will see retail prices of homes fall 46% as this would put us on par with 2008 which is not in the cards at this point.  But, there will still be a drop in the 5-15% range is most probable.  At the same time large investors will focus on buying huge pools from banks, the FDIC, etc… as the financial sector hits headwinds.

Summary

Before this recession, I thought that Wall street would put a floor under prices so that they didn’t fall too far.  Unfortunately in a high rate environment this assumption has been turned on its head.  Based on interest rates staying higher for longer this means that Wall Street will not bail out the housing market until prices fall considerably (40% or so to make the returns work).  Although I don’t foresee a drop this steep, it does portend that the market will be able to fall quite a way before Wall street comes to the rescue.

Currently my base case is a 5-15% drop depending on market, price point, etc… but I don’t see a 2008 repeat in the near future.  The wild card is how high the federal reserve needs to take rates and how long they have to hold them high before something bad breaks in the economy.  So far, it looks like a moderate recession, but as with anything in economics, there are a ton of variables that could radically alter this assumption.  In the meantime, I’m confident prices will have a reset in early 2024 due to higher rates so plan accordingly.

Ever stumbled upon a quaint café in an unexpected place and thought, “How did I not know about this?” The world of real estate has its own hidden cafes—secondary and tertiary markets. But why are they like hidden gems, and how can you, as an investor, benefit from them? Let’s unpack it:

• Primary Markets: These are big players such as Dallas, LA, or Chicago.
• Secondary Markets: Cities like Austin, Nashville, and Portland, which have been gaining traction.
• Tertiary Markets: Think of areas like Bend, Oregon, or Macon, Georgia. They may be talked about less, but they’re brimming with potential.

Considering a fix-and-flip project or rental investment properties in these lesser-sung regions? Let’s weigh some of the pros and cons.

Upsides of investing in secondary and tertiary markets

Cost-efficient entry

These markets are often in regions that haven’t experienced the rapid urbanization and commercialization in primary cities. Without the hype and media attention driving up property prices, entry costs remain relatively low. This allows investors to make strategic, calculated investments without the heavy financial weight that prime markets often demand. A savvy investor can view this as an opportunity to diversify their portfolio, leveraging the affordability of these markets.

Less crowd, more space

Most often in the limelight, primary markets attract domestic and international investors. In contrast, secondary and tertiary markets remain relatively under the radar.

The charm of this understated focus is the freedom it offers. Real estate investors can take their time to understand a property, negotiate without the pressure of multiple counter-offers, and finalize deals in a less aggressive environment. This space for deliberation can lead to more informed and, ultimately, profitable decisions.

Promising returns

The untapped nature of these markets means there’s substantial room for growth. The ROI here isn’t just about immediate profits. It’s also about long-term appreciation.

As these markets mature and attract more attention, early investors can see substantial returns on their initial investments. To succeed in these markets, look for properties that can increase in value over time as the market changes.

Steady growth

Primary markets are influenced by global trends and international investments. On the other hand, secondary and tertiary markets typically experience growth as a result of local factors.

This means growth is often steadier and more predictable, grounded in local economic and infrastructural developments. For an investor, this translates to more sustainable, organic appreciation. Monitoring local news, understanding community plans, and keeping an ear to the ground can provide valuable insights into potential growth trajectories.

Challenges of investing in secondary and tertiary markets

Potentially more demanding research

The relatively low-profile nature of these markets means that traditional real estate research tools might not always offer comprehensive data. This challenge, however, is also an invitation for investors to innovate. Engaging with local realtors, joining community forums, and even connecting with residents can offer invaluable insights. Immersive research helps choose properties and understand local culture, preferences, and long-term investment viability.

More gradual appreciation

These markets are influenced by local factors. So, the speed of growth may not be as fast as the rapid increases seen in top markets.

However, slow and steady growth can be a blessing in disguise. It gives investors the time to adapt, make further investments, or even exit if they foresee a plateau. Recognizing the steady nature of these markets is essential to setting realistic expectations and crafting a strategic investment plan.

Networking nuances

The bustling real estate events and seminars are less frequent here, but that shouldn’t deter the passionate investor. Embrace this as an opportunity to pioneer. Host local meetups, collaborate with community leaders, or even establish digital forums for like-minded investors targeting these markets. By taking the initiative, you not only build a network but potentially position yourself as a thought leader in the space.

Market variability

These markets can be sensitive to local economic shifts. A significant employer downsizing or a local industry experiencing a downturn can have palpable effects.

But with challenge comes opportunity. Staying informed about local happenings can allow proactive investors to pivot strategies, hedge risks, and even identify new avenues for investment. Regular engagement with local businesses and economic forums can be invaluable.

Taking the plunge: Market research and tips for new local market investments

It’s pivotal to acknowledge the importance of thorough market research when considering investments in secondary and tertiary markets. Venturing into these lesser-known territories requires a tailored approach. So, where should you start?

• Local Expertise: Building relationships with local real estate agents or brokers can offer unique insights that standard market reports might miss. They have their fingers on the pulse of the local community, understanding the intricacies and trends that define these markets.
• Community Forums & Social Media: Engage in local online forums or social media groups. These platforms have valuable information about neighborhood developments, upcoming projects, and local events that can affect property values.
• Visit In-Person: Nothing beats an on-ground visit. Walk the neighborhoods, visit local businesses, and strike up conversations with residents. This will show you the community spirit and help you understand how many people want to rent or buy renovated properties.
• Assess Local Amenities: Look for signs of growth. Are new schools being built? Are there parks and recreational areas? What about public transport facilities? These can be indicators of a budding community, which can be especially attractive for rental investments.
• Stay Updated: Once you’ve gathered your initial insights, it’s essential to keep updating your knowledge. Markets evolve, and what’s true today might change in a few months. Set up Google alerts, subscribe to local news outlets, and keep in touch with your local connections.

Venturing into a new market also means adapting your investment strategies to align with local demands. For fix-and-flip projects, understanding the local architectural preferences, popular home features, or even favored color palettes can be the difference between a property that sells instantly and one that lingers on the market.

For rentals, it’s about understanding the demographics. Are potential tenants young professionals, families, or perhaps retirees? Each group has unique needs, from proximity to schools to easy access to nightlife.

Aside from conducting market research, it is crucial to find a reliable lending partner. One that has a proven track record and expertise in the local market.

That’s where Muevo comes in

At Muevo, we’re changing the real estate financing game. Our presence in 50 states plus DC has equipped us with diverse market insights. We’ve seen the aspirations of investors in primary cities and the untapped passion of those in secondary and tertiary ones. This broad spectrum of experience allows us to offer tailored financing solutions, from Fix and Flip/Bridge Loans to DSCR Rental and Rental Portfolio Loans.

We combine the agility of technology with human expertise, ensuring you close deals faster, enjoy competitive rates and have our unwavering support in every step.

Wrapping up

Exploring secondary and tertiary markets means embracing both the challenges and opportunities they present. The key? Knowledge, diligence, and a reliable partner in your corner. As the landscape of real estate investing evolves, staying informed and adaptable can be your greatest asset.

So, whether you’re diving into the deep end or just dipping your toes, remember every market has its unique story. Happy investing, and here’s to uncovering the next great opportunity!

Operating as a landlord is one of the best ways to pursue a career in real estate. For that matter, few exit strategies have proven more capable of generating long-term profits and facilitating financial independence. It is worth noting, however, that today’s most successful rental property owners are those who know where to invest. The market in which a rental property is located will play an instrumental role in its success or failure. Therefore, landlords must pay special considerations to where they buy their homes. Landlord friendly states, for example, warrant a great deal of consideration.

What Factors Make States Landlord Friendly?

From tenant-landlord laws to taxes and insurance rates, landlords in every state are expected to abide by countless rules and regulations. However, it is worth noting that many of the regulations put in place to maintain order are extremely localized. Outside of a few nationally recognized exceptions, many of the laws governing landlord and tenant relations change from state to state. As a result, several existing factors make some states more conducive to the prospect of owning rental properties than others.

While the factors investors find most attractive are essentially subjective, there are approximately six that are universally found in today’s most landlord-friendly states:

• Eviction Process: Evictions are perhaps the most feared aspect of rental property investing, which is why many landlords covet states which ease the process. Subsequently, some states make it a lot easier to evict bad tenants than others. While some tenant-friendly states make it nearly impossible, others tend to side with landlords by making the eviction process as quick and painless as possible, exercising a low tolerance for tenants who breach their leases.
• Landlord & Tenant Rights: Both tenants and landlords are awarded rights in each state, but the degree to which those rights are carried out will vary significantly across state lines. Sometimes, tenant rights are so extreme that they may actually jeopardize the landlord’s financial standing. On the other hand, several states have developed a more balanced reputation that favors each party. As a landlord, it may be in your best interest to invest in states whose laws don’t work against your right to earn a living.
• Rent Control: As its name suggests, rent control is often implemented to control the cost of rent in certain areas. Some states don’t allow landlords to increase rents despite inflation and yearly increases in taxes and utilities. The idea is to prevent ill-intentioned landlords from price gouging tenants, but the laws may hurt well-intentioned landlords trying to earn a living. Therefore, investors looking to become landlords should pay special considerations to any areas under the rent control umbrella.
• Registration & Licenses: There are a number of states that require landlords to acquire both registrations and licenses to actively rent their real estate assets to tenants. The licenses and regulations are, not surprisingly, to prepare homeowners for the prospects of becoming a landlord. That said, many of these credentials cost money, and can be more of a burden to some landlords, so it may be in an investor’s best interest to lease in a landlord-friendly state that doesn’t require them.
• Tax & Insurance Rates: Property taxes, and sometimes even insurance rates, are established by local municipalities. As a result, prospective landlords will want to consider the property taxes imposed on their own assets in the event they rent them out. Consequently, some states have much higher taxes than others, so it may literally pay to look at local taxes before investing in a rental property.
• Competition: The golden rule of real estate investing still reigns true: location, location, location. The location in which an investor chooses to buy a rental property is more important than ever, in fact. Due largely to the amount of competition in each market, investors will want to choose their location wisely. That said, some states inherently have more competition than others.
• Regulations After COVID-19: The COVID-19 pandemic brought about many changes to the real estate industry, including federal and state laws regulating rental properties. These policies mandated eviction moratoriums and rent freezes in certain localities. Many states have begun relaxing the laws set during 2020, and allowing landlords to resume regular operations.

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[ Learning how to invest in real estate doesn’t have to be hard! Our online real estate investing class has everything you need to shorten the learning curve and start investing in real estate in your area. ] 

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The Best States For Landlords In 2022 & 2023

There are a great deal of states that have developed a reputation for helping landlords in their investment endeavors, but some states boast inherent advantages over others. Three states, in particular, seem to award landlords with more benefits than just about everywhere else. To that end, some of the most landlord-friendly states in the upcoming year are as follows:

• Texas
• Indiana
• Colorado
• Alabama
• Arizona
• Florida
• Illinois
• Pennsylvania
• Ohio
• Georgia
• Kentucky
• Michigan
• North Carolina

Texas

Out of all the states landlords have found to be the most conducive to investing efforts, none may be more apparent than Texas. As it turns out, Texas offers a wide variety of landlord advantages. Still, the single most important reason has to do with the state’s inclination to take lease violations very seriously. Due largely to Texas’ propensity to favor landlords in lease violations, it’s fairly easy to see why rental property owners are enamored with the prospect of buying assets in the Lone Star State.

In fact, Texas tends to emphasize the preservation of landlords’ rights in the event lease conditions are broken. For that matter, few places facilitate easier relief, compensation, or repossession of the rental unit if the lease terms are violated. That means landlords with well-crafted lease agreements can enjoy more “peace of mind” than their counterparts in just about every other state. If that wasn’t enough, Texas boasts several affordable markets where demand is increasing, and rental asking prices are still desirable.

Indiana

One of the most landlord-friendly attributes of Indiana is the state’s price-to-rent ratio. With a median home value of $145,300, which is well below the national average, the median rent in Indiana is about $1,100. However, it is worth noting that the profit potential isn’t the only reason landlords find Indiana to be such a great place to own a rental property. In addition to attractive rental rates, the rules that govern security deposits lean heavily in favor of landlords. Laws in the state of Indiana allow landlords to retain security deposits for 45 days. As a result, landlords may take an appropriate amount of time to determine whether they need to use the deposit on any damages caused by tenants. Other states don’t give the landlord enough time to evaluate the property, potentially leading to them giving back the deposit when some of it should have been kept.

Colorado

Colorado is unique in that it is one of the few states where local law enforcement takes the landlord’s side. Whereas many states protect the tenants’ rights at the expense of the landlord, Colorado does the opposite. As a result, the process of evicting a tenant for unpaid rent is made simpler. Any demand for compliance notices initiated by the landlord is limited to 72 hours. Tenants are given two options at that time: pay their landlords or leave the property. After the demand for compliance expires, tenants are given a mere 48 hours to get out of the home. Other states, however, may allow the eviction process to drag on for far too long, effectively ruining any profit potential for the owner.

Alabama

Many of the state laws in Alabama make it an attractive state for landlords. Property tax rates are the second-lowest in the country at just 0.42%, making real estate investing options attractive. Landlords can raise the rent as long as they provide a 30-day notice. Rental laws prevent tenants from withholding rent if a landlord does not make repairs to the property. Also, landlords are favored in the eviction process in Alabama. If a tenant breaches the rental agreement, landlords can give a 14-day notice to end the lease. If tenants do not pay the rent, the landlord can give a 7-day notice of eviction. Alabama state laws do not cover late rent fees, meaning that landlords have the freedom to set their own prices for late rent fees. 

Arizona

Similar to Alabama, landlords can raise the rent on their property with a 30-day notice. Landlords in Arizona are favored in the eviction process. If a tenant fails to pay rent or fails to maintain the property, the landlord can give a 5-day notice to rectify the situation. If a tenant breaches the rental agreement, the landlord can give a 10-day notice. If the issue is not rectified, the landlord can then file an eviction lawsuit. In more cases of more serious violations, such as vomiting a crime on the property, a landlord can give an unconditional quit notice to vacate the property within 10 days.

Florida

Although Florida has one of the highest population of renters in the US, the laws in this state lack detail, creating favorable circumstances for landlords and the freedom to set many of their own rental guidelines. For instance, as long as it is returned within 60 days after a tenant vacates the property, there is no limit to the amount a landlord can charge for a security deposit. Rent control is prohibited in Florida, and landlords can set their own price for late rent fees. If a tenant is destroying the property, landlords can give a 7-day notice to vacate before proceeding with eviction lawsuits. 

Illinois

Landlords in Illinois can also set their own prices for a security deposit for their rental properties. The security must be returned within 45 days unless the tenant owes money in rent or has caused damage to the property. Late fees are limited to $20 or 20% of the rent. If a tenant breaks the lease terms, landlords can give a 10-day notice to vacate the property before proceeding with the eviction process. 

Pennsylvania

The eviction laws in Pennsylvania are also attractive to landlords in Pennsylvania. If the tenant fails to pay rent or violates the lease terms, the landlord can issue a 10-day notice to pay or move out. After 10 days, the landlord can begin the legal eviction process. The average rental income in this state is around $1,300, which is an attractive cash flow for rental owners. Cities such as Philadelphia and Pittsburgh have different landlord-tenant laws than the state, so be sure to research these regulations when investing in Pennsylvania. 

Ohio

Becoming a landlord in Ohio comes with the potential for tax write-offs such as mortgage appreciation and improvements made to the property. Also, the eviction process favors the landlord in this state. If a tenant fails to pay rent, the tenant must move out of the property within three days after receiving notice from the landlord.

Georgia

Georgia is another state with informal eviction laws, allowing landlords to quickly resolve issues with unpaid rent. After landlords issue an eviction notice, tenants have seven days (unless otherwise specified) to pay rent. If they do not, landlords can begin court proceedings to remove tenants if necessary. There are also no limits on late rental fees or security deposits in Georgia, thus providing landlords with more flexibility to establish these numbers based on the property. 

Kentucky

Rental laws in Kentucky fail to specify limits on late fees or security deposits. Landlords can use the security deposit funds for any damage done to the unit, unpaid rent, or other costs incurred by the tenants. Kentucky also has extremely lenient eviction laws. Landlords can begin the eviction process with a seven-day notice to tenants. For any other lease violations, landlords only need to provide a 15-day notice to begin the eviction process (if the tenant does not fix the issue). 

Michigan

Michigan allows landlords to deduct damages from a tenants’ security deposit, and allows them to hold onto the deposit for up to a month after tenants vacate a unit. Michigan is also known for looser laws on rental rates and fees charged by landlords. Note that Michigan does have a slightly higher property tax rate than the national average. However, the protections built in for landlords can be beneficial for property owners. 

North Carolina

North Carolina is a rapidly growing market, largely due to the low cost of living and tax rates. For landlords, there are numerous policies that can help when managing properties. First, in cases of a lease violation landlords do not have notice requirements before initiating an eviction. However, in cases where rent is not paid, landlords must give a ten-day notice before starting the eviction process. Landlords are not obligated to renew the lease or rental agreement. 

Summary

While great rental markets exist in every state, there’s no doubt that some states reward investors who choose to set up shop in certain locations. Make no mistake, certain states are better to invest in than others. For example, landlord-friendly states tend to place the rights of homeowners ahead of their tenants, which bodes incredibly well for any rental property portfolio. These states tend to favor landlords in the eviction process and offer low property taxes. Combined with great cash flow, there’s no reason landlord friendly states can’t simultaneously put an asset over the top while mitigating risk. Therefore, pay special considerations to the rules in regulations in your particular state.

West Virginia, known for its rugged landscapes and warm Appalachian hospitality, also offers a range of affordable cities that are perfect for those seeking a high quality of life without breaking the bank. In this article, we’ll explore the top 10 most affordable cities in West Virginia. Each city on this list combines affordability with a wealth of amenities, creating a welcoming environment for residents of all ages. Join us as we delve into the beauty of these budget-friendly cities and examine the factors that contribute to their affordability, along with the importance of education, healthcare, recreation, and community engagement.

Top 10 Cities in West Virginia

10. Wheeling: Nestled along the Ohio River, Wheeling stands as a historic and affordable city in West Virginia. The cost of living in Wheeling is below the national average, offering affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s rich history, cultural events, and recreational opportunities make it an attractive destination for residents seeking affordability and charm.

9. Parkersburg: Parkersburg, located along the Ohio River, is another affordable city that offers a high quality of life. The cost of living in Parkersburg is below the national average, providing affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s friendly community, access to outdoor recreation, and cultural attractions make it an appealing place to call home.

8. Martinsburg: Martinsburg, in the eastern part of the state, is an affordable city with a small-town feel. The cost of living in Martinsburg is below the national average, offering affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s proximity to Washington D.C. and Baltimore adds to its allure, while its historical sites, recreational activities, and community events create a vibrant lifestyle for residents.

7. Morgantown: Home to West Virginia University, Morgantown is an affordable city that combines a lively college town atmosphere with stunning natural beauty. The cost of living in Morgantown is below the national average, providing affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s access to outdoor recreation, educational opportunities, and cultural events make it a popular choice for residents.

6. Clarksburg: Clarksburg, nestled in the hills of North-Central West Virginia, offers an affordable and serene lifestyle. The cost of living in Clarksburg is below the national average, offering affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s rich history, recreational opportunities, and community engagement make it a warm and inviting place to live.

5. Huntington: Huntington, located along the Ohio River in the western part of the state, is an affordable city with a vibrant energy. The cost of living in Huntington is below the national average, providing affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s cultural diversity, access to outdoor recreation, and community events create a dynamic and inclusive atmosphere for residents.

4. Beckley: Beckley, surrounded by lush mountains in southern West Virginia, offers an affordable escape with a relaxed ambiance. The cost of living in Beckley is below the national average, offering affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s proximity to national parks, recreational opportunities, and community gatherings make it a tranquil and budget-friendly place to call home.

3. Clendenin: Clendenin, situated along the Elk River, is an affordable city with a close-knit community. The cost of living in Clendenin is below the national average, providing affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s scenic beauty, outdoor recreation, and community-driven events create a warm and inviting atmosphere for residents.

2. Grafton: Grafton, nestled in the Allegheny Mountains, offers an affordable and peaceful living experience. The cost of living in Grafton is below the national average, offering affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s historical charm, recreational opportunities, and strong sense of community make it an idyllic and budget-friendly destination.

1. Ripley: Ripley, located along the Ohio River, rounds out our list of the top 10 most affordable cities in West Virginia. The cost of living in Ripley is below the national average, providing affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s friendly atmosphere, recreational activities, and community events make it a welcoming and affordable place to live.

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Factors that Contribute to Affordability

1. Cost of Housing: Affordable cities in West Virginia generally offer a range of housing options, from affordable rentals to reasonably priced homes, making it easier for residents to find suitable accommodation within their budget.
2. Utilities and Transportation: These cities often have lower utility costs, including electricity, water, and gas. Additionally, transportation expenses, such as fuel prices and commuting costs, are generally more affordable compared to national averages.
3. Groceries and Everyday Expenses: The cost of groceries and everyday expenses, including food, household goods, and services, is often more reasonable in these cities, allowing residents to manage their day-to-day expenses effectively.

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The Importance of Quality of Life

1. Education: Access to quality education is crucial for families and individuals. Many of these cities offer excellent educational institutions, including public schools, colleges, and vocational training centers, providing opportunities for learning and personal growth.
2. Healthcare: Access to reliable healthcare facilities and services is essential for a high quality of life. These cities have reputable hospitals, clinics, and healthcare providers, ensuring that residents have access to quality medical care when needed.
3. Recreation: Affordable cities in West Virginia often offer a plethora of recreational activities, taking advantage of the state’s natural beauty and four distinct seasons. From hiking and biking in the mountains to water sports on the rivers and lakes, residents can enjoy various outdoor pursuits throughout the year. Additionally, many cities host community events, cultural festivals, and concerts, fostering a vibrant and engaging atmosphere.
4. Community: A strong sense of community is essential for a fulfilling lifestyle. In West Virginia’s most affordable cities, residents can find a warm and welcoming atmosphere, where neighbors come together to support one another. Community events, such as farmers’ markets, cultural festivals, and charity fundraisers, provide opportunities for socializing and building connections.

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Conclusion

West Virginia’s top 10 most affordable cities offer a wealth of opportunities for individuals and families seeking a quality lifestyle without breaking the bank. From charming river towns to vibrant college communities, these cities exemplify West Virginia’s warmth and sense of community. The factors that contribute to affordability, such as cost of housing, utilities, and everyday expenses, make living in these cities a cost-effective and prudent choice.

Beyond affordability, the importance of education, healthcare, recreation, and community engagement enhances the overall quality of life in these cities. Residents can access top-notch educational institutions, reliable healthcare services, and a wide array of recreational activities that celebrate West Virginia’s natural beauty and cultural heritage. The strong sense of community fosters a welcoming environment, where residents can forge lasting connections and thrive.

Whether you’re a young professional, a growing family, or a retiree seeking the perfect place to call home, West Virginia’s most affordable cities offer an inviting and enriching lifestyle. Explore these cities and discover the unique opportunities each one has to offer, making your dream of living in the Mountain State a reality.

Wisconsin, the Dairy State, is renowned for its picturesque landscapes, friendly communities, and a cost of living that won’t break the bank. If you’re in search of a place to call home that offers affordability without compromising on quality of life, you’re in luck! In this article, we will uncover the top 10 most affordable cities in Wisconsin. Each city on this list provides a unique blend of affordability, access to excellent amenities, and a welcoming community atmosphere. Let’s dive into the beauty of these budget-friendly cities and discover the factors that contribute to their affordability, along with the importance of education, healthcare, recreation, and community engagement.

Top 10 Cities in Wisconsin

10. La Crosse: Nestled along the banks of the Mississippi River, La Crosse is a hidden gem in Wisconsin. The city’s cost of living is below the national average, offering affordable housing options, lower transportation costs, and reasonable healthcare expenses. With picturesque views, abundant recreational opportunities, and a vibrant downtown area, La Crosse provides residents with a high quality of life without a hefty price tag.

9. Eau Claire: Eau Claire, known for its arts and culture scene, is another affordable city in Wisconsin. The cost of living in Eau Claire is lower than the national average, providing affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s strong sense of community, diverse cultural events, and access to outdoor activities make it an attractive destination for budget-conscious individuals and families.

8. Green Bay: Home to the Green Bay Packers, Green Bay is not only a sports haven but also an affordable city. The cost of living in Green Bay is below the national average, offering affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s proximity to Lake Michigan, outdoor recreational opportunities, and lively community events make it a sought-after location for residents.

7. Appleton: Appleton, situated in northeastern Wisconsin, is an affordable city with a rich cultural heritage. The cost of living in Appleton is lower than the national average, providing affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s excellent school system, recreational facilities, and family-friendly atmosphere make it an ideal place to call home.

6. Janesville: Janesville, located in southern Wisconsin, offers an affordable living experience. The cost of living in Janesville is below the national average, providing affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s beautiful parks, recreational activities, and community events create a welcoming environment for residents.

5. Wausau: Wausau, situated in the heart of Wisconsin, combines affordability with natural beauty. The cost of living in Wausau is below the national average, offering affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s access to outdoor recreation, cultural attractions, and a strong sense of community make it an attractive destination for residents.

4. Sheboygan: Sheboygan, located on the shores of Lake Michigan, is an affordable city with a charming coastal vibe. The cost of living in Sheboygan is below the national average, providing affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s stunning beaches, water sports activities, and cultural festivals create a lively and enriching lifestyle for its residents.

3. Superior: Superior, situated on the western tip of Lake Superior, is an affordable city with a relaxed maritime ambiance. The cost of living in Superior is below the national average, offering affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s access to outdoor recreation, historical landmarks, and community events make it a captivating place to live.

2. Manitowoc: Manitowoc, nestled on the shores of Lake Michigan, offers affordability with a touch of nostalgia. The cost of living in Manitowoc is below the national average, providing affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s maritime heritage, recreational opportunities, and friendly community create a warm and inviting atmosphere for residents.

1. Beloit: Beloit, located on the Wisconsin-Illinois border, is an affordable city with a vibrant downtown scene. The cost of living in Beloit is below the national average, offering affordable housing options, lower transportation costs, and reasonable healthcare expenses. The city’s diverse cultural events, recreational facilities, and community engagement opportunities make it a lively and budget-friendly place to call home.

Factors that Contribute to Affordability

1. Cost of Housing: Affordable cities in Wisconsin generally offer a range of housing options, from affordable rentals to reasonably priced homes, making it easier for residents to find suitable accommodation within their budget.
2. Utilities and Transportation: These cities often have lower utility costs, including electricity, water, and gas. Additionally, transportation expenses, such as fuel prices and commuting costs, are generally more affordable compared to national averages.
3. Groceries and Everyday Expenses: The cost of groceries and everyday expenses, including food, household goods, and services, is often more reasonable in these cities, allowing residents to manage their day-to-day expenses effectively.
4. The Importance of Quality of Life
6. Education: A strong educational system is essential for the growth and development of a community. The most affordable cities in Wisconsin prioritize education, with well-funded schools, dedicated teachers, and access to educational resources. From top-notch public schools to renowned universities and community colleges, residents can find excellent opportunities to pursue their academic goals.
7. Healthcare: Access to quality healthcare services is paramount for residents’ well-being. Affordable cities in Wisconsin offer a range of medical facilities, hospitals, clinics, and healthcare professionals to ensure that residents receive the care they need. Residents can access preventive care, specialized treatments, and wellness programs to maintain their health and vitality.
8. Recreation: Wisconsin’s affordable cities embrace the state’s natural beauty, offering residents an abundance of recreational opportunities. From serene lakes for fishing and water sports to scenic parks for picnics and relaxation, there’s no shortage of outdoor activities to enjoy. Additionally, many cities host community events, arts festivals, and sports competitions, fostering a sense of camaraderie and engagement among residents.
9. Community: A strong sense of community is essential for a fulfilling lifestyle. In Wisconsin’s most affordable cities, residents can find a warm and welcoming atmosphere, where neighbors come together to support one another. Community events, such as farmers’ markets, cultural festivals, and charity fundraisers, provide opportunities for socializing and building connections.
10. Conclusion
11. Wisconsin’s top 10 most affordable cities offer a wealth of opportunities for individuals and families seeking a quality lifestyle without breaking the bank. From scenic lakefront communities to vibrant cultural centers, these cities showcase Wisconsin’s diverse charm and sense of community. The factors that contribute to affordability, such as the cost of housing, utilities, and everyday expenses, make living in these cities a cost-effective and prudent choice.
12. Beyond affordability, the importance of education, healthcare, recreation, and community engagement enhances the overall quality of life in these cities. Residents can access top-notch educational institutions, reliable healthcare services, and a wide array of recreational activities that celebrate Wisconsin’s natural beauty and cultural heritage. The strong sense of community fosters a welcoming environment, where residents can forge lasting connections and thrive.
13. Whether you’re a young professional, a growing family, or a retiree seeking the perfect place to call home, Wisconsin’s most affordable cities offer an inviting and enriching lifestyle. Explore these cities and discover the unique opportunities each one has to offer, making your dream of living in the Dairy State a reality.

• New York allocated $85 million to pay homeowners for building ADUs in their backyards.
• Grants are given to local governments or nonprofits who distribute the funds.
• New York is doling out millions to help homeowners build tiny homes, called accessory dwelling units, or ADUs, in their backyards. 
• As of August 15, the Empire State has spent $23.4 million doing so, according to New York State Homes and Community Renewal, which is in charge of the funds. 
• It’s part of a package passed within the state’s 2022 to 2023 budget called the Plus ONE ADU Program, which provides grants of up to $125,000 to homeowners across the state who add an additional housing unit to their property. The state plans to give a total of $85 million out in grants by 2028. 
• “It comes at a time when we need to investigate every avenue to build every single unit that we have,” Jolie Milstein, president of the New York State Association for Affordable Housing, told Insider. 
• The program is one way lawmakers are trying to ease a worsening housing shortage, a nationwide issue that is making both buying and renting a home very expensive for most Americans.
• Through this program and other proposals, Gov. Kathy Hochul is planning to address “New York’s housing crisis by increasing the housing supply, which is why she brought forth initiatives to expand housing options — including through the construction of accessory dwelling units,” a HCR spokesperson told Insider. 
• In the first round of funding, HCR gave out nine grants of between $500,000 to $2.6 million to local governments like Ulster County and the Town of Amherst, and nonprofits like Habitat for Humanity of New York City and Westchester, HCR said. 
• Through these grants scores of homeowners — from those located near Buffalo to New York City — will receive cash to turn their garage into an apartment or build a tiny home in their backyards, HCR said. 
• In order to apply, owners need to meet a certain threshold of the area median income, which varies depending on where they live in the state.
• Many cities, in New York and beyond, have eased zoning ordinances to allow homeowners to build additional living units on their property.
  
• In California — where the housing crisis is especially dire — the state legislature even overrode local zoning ordinances, to allow all homeowners to build on their property. A similar bill in New York did not make it through the legislature, Spectrum News 1 reported.
• Still, Milstein sees the grant program as an “innovative” way to give those a head start where building is legal, and “show this can be a successful way to allow people the freedom and flexibility to address the crisis in their own home.”