November 2024 Insights: Home Unaffordability

Economic Update

As we head into the Thanksgiving weekend and the holiday season we hope everyone will get to spend a lot of quality time with their families. For me personally this time of the year usually sparks thoughts about carrying on old traditions, making new traditions, and core memories being formed with my immediate family (my wife and our two young boys).

As a parent of young kids this time of the year also usually gets me thinking about the future for my kids, and how they will deal with the challenges they face. One of those challenges came up during a conversation with my brother last week, which was us discussing how difficult it will be for our kids to ever own a home given how much home prices have risen over the last 4 years. This is a thought I am sure we are not alone in, and when you look at the data of just how difficult it has gotten, you can see the magnitude of the home ownership hurdle.

Thank you for sticking with me so far and I promise I’m getting to my point. At Vanamor we are Multifamily investors, and this sector that we invest in is a direct beneficiary of the unaffordability of single family homes. For those that are unable or unwilling to purchase a home, they create demand for multifamily rentals, and barring a Great Financial Crisis like decline in single family home values, this dynamic is likely a secular tailwind for the sector.

While I don’t personally like the idea of home ownership being increasingly difficult for future generations, I do think it creates a compelling investment case for multifamily over a long-term investment horizon.

Pipeline

As we approach the end of the year many buyers and sellers take their foot off the gas and wait until the next calendar year to pick back up. We are not taking that approach as we continue to believe we are in a period of attractive valuations for select assets that are down 20-40% from their 2022 valuations and welcome a period of decreased competition. We have bid on over $100 million worth of assets in the last month and while we have not been awarded a new deal, we have been competitive on multiple assets, which is encouraging as it tells us the bid ask spread between buyers and sellers has narrowed from earlier in the year. We will continue to be diligent with our underwriting and wait for the market to come to us.

What We Do

We are strategic real estate investors.

At Vanamor, we combine an institutional approach with an often overlooked middle-market focus to employ a flexible and disciplined investment philosophy. Our goal is to provide stable cashflow with above-market total returns. Since inception, Vanamor has averaged a greater than 33% annual return with an average of 8% annual cashflow distribution.