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In issue 40, we cover an investor taking a swing on high-end homes as well as Pittsburg, and the growing number of mortgage free homeowners.

publicly.traded → Investor Takes a Swing at High-End Market
industry.chatter → Pittsburg is the place for affordable housing
charts → data on Mortgage free homeowners at a record high

From Flipping to Developing: Investor Takes a Swing at High-End Market

When proptext spoke to Daniel Rybin last year, he had just finished his 12th flip and was adjusting to life with six-month-old twins, who joined three older siblings in the family.

Rybin had developed a system that aimed for 100 days from closing to closing, orchestrating his renovations with multiple work crews on site to get homes back on the market as quickly as possible for sale in the $600,000-800,000 range.

Since then, he’s flipped that script and is mostly focused on new development, and the homes he is building these days are almost 10x the price of the flips he’d been doing. The process takes longer, some 18 months or so, but Rybin said the higher margins justify the investment of time. 

“The jump really happened when I found the perfect lot and my friends said if there ever was a time to take a swing for the fences this was the time,” Rybin said. “I had shied away from new construction because of the long lead time.”

In the past year, he finished and sold his first new house for $4 million and finished a second one that sold for $6 million. The first one was on the Indian Hills Country Club golf course in Marietta, Ga., a neighborhood that also has a top-notch school system. He has two more houses in the pipeline that he thinks he will go for $7 to $8 million. He thinks he can eventually sell properties in that area for $10-15 million, appealing to successful doctors and lawyers in the Atlanta area, as well as film executives and athletes. 

“We built the biggest, nicest house in the neighborhood and created our own comp over $1 million more than the next highest price,” Rybin said. “Now I’m trying to beat this.”

Rybin hired a new designer for the $4 million home, then went back to his original designer for the second one. He used most of the same subcontractors for the multimillion dollar properties as he did when the homes sold for $700,000 or so, and had to find some new tradesmen for some work. He decided to take a crack at more expensive properties for several reasons.

“Why go up the price pole?” he asked. “It’s a lot easier to focus on one big house than it is to focus on 3 or 4 smaller houses.” 

He still operates as his own project manager — what he called his real estate superpower in his first interview — and lives a short drive from the properties he is developing. Building higher-end, he discovered, was not as complicated as one might assume.

“It’s not as difficult as it looks, and I’m not saying that to be smug,” Rybin said “The houses get larger and the finishes get nicer. I might be putting in nicer flooring but it’s my same flooring vendor. My appliance vendor is going to sell me Wolf and Sub-Zero instead of Bosch and GE. 

“So it’s not like I need to change the group I work with,” he added.

At the end of the day, Rybin said his commitment to quality has served his business well. In his previous interview, he spoke about how finding a mentor in real estate was a game changer for him. He recommends those looking to get into developing or renovating homes find somebody who can show them the right way to do it.

“I think people love to see quality work at any price point,” he said. “People are going to gravitate to higher quality work, and look for clean work. Buyers are picky and are going to pick at half-assed work.”

Those in search of affordable housing should head to Pittsburgh, where the median home price is $229,000, a little more than half of the US median of almost $411,000, the Washington Post reported. Basic economics — more supply than demand — has kept prices in check. The city’s steel industry collapsed in the late 1970s, and it has more houses than buyers, including some 25,000 properties that are vacant or abandoned. Many of the homes that are available are older and need renovations, also tamping down prices. Wages are strong too — the local median is $77,050, fueled by a diverse economy that includes higher education, health care, financial services, tourism and technology.

Home buyers these days are both older and wealthier, according to a report from the National Association of Realtors. The typical home buyer today is 59 years old, an all-time high. The median age of first-time buyers, 40, as well as repeat buyers, 62, are both also at record highs. In the 1980s, the typical first-time buyer was in their late 20s. First-time home buyers in the last year shrank to a historic low of just 21 percent of all buyers. Prior to 2008, the share of first-time buyers had a historical norm of 40 percent. People in their 60s and older are not buying out of necessity, Jessica Lautz, deputy economist at NAR, told MarketWatch. “They’re moving because they can, and they can purchase what they would like to at this point in their life,” she said. 

Just Because

A mansion in the Bel-Air neighborhood of Los Angeles that was once on the market for $250 million is now at risk of being sold in foreclosure, the Wall Street Journal reported. The financier Gary Winnick, who was said at one time to be the wealthiest person in Los Angeles, purchased the 8.5-acre Casa Encantada property and 40,000-square-foot home with his wife, Karen Winnick for $94 million in 2000, the most expensive home-sale at the time. In 2020, an entity tied to the Winnicks borrowed $100 million from the CIM Group, and has fallen behind on payments, according to a notice of sale filed in September. Casa Encantada went on the market in June 2023, five months before Gary Winnick died. Now asking $190 million, it is still the most expensive residence listed for sale in the Los Angeles area. The CIM group, a real-estate investment firm, ordered Casa Encantada and a Winnick family home in Malibu to be sold at auction to satisfy debt that has grown to more than $150 million. The auction is scheduled to take place Dec. 16, behind a fountain in Pomona’s Civic Center Plaza. If an outside bidder does not emerge, CIM could take title to the properties. 

35 million mortgage free homeowners represents around 40% of US homeowners (~86M) is the highest it’s ever been in the available series (data pre-1950 not as reliable).

Mortgage-free households act like “shock absorbers.” They rarely face distress sales, so when markets cool, supply doesn’t surge, and prices don’t collapse. That’s a positive for financial stability — but it means prices don’t correct downward either, keeping entry barriers high for new buyers.

It also means the Fed’s lever (raising or lowering interest rates) loses some bite. Fewer homeowners are affected by rate cuts, so housing no longer amplifies monetary policy the way it used to.

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