Why do I write these reviews... Well, I think an informed investor is an investor that makes better decisions. Better Decisions usually mean better returns. Better returns means I can lend more money to that investor. I write these not just to give you the data, but to help you comb through it and see whats really happening. It's really easy to watch all these news shows and reports and think the sky is falling, but numbers don't lie.
Here's an example:
In January 2023, SFH homes sales fell 29.9% with 4,549 units sold compared to 6,492 units in January 2022. That means this is the 10th month of consecutive monthly declines. Now, if you just read that and don't look at the data, you are heading for the hills! But market trends have to go over a span of time. We just left one of, if not the biggest real estate spike of our time. With record low rates and astronomical purchases and appreciation. So let's dig worthy adventurer and see if you want to continue the investment journey.
Yes, January is down about 30% from last year, but what is that compared to a similar market? When you look at January 2020, where the inventory and market were similar, we are only down 4.6%. That's right, 4.6% and not including the prices of homes are still rising and inflation and material cost is still out of control.
So, we have sales down. What happens when sales go down? Rent's go up. We had another sold gain in SFH rentals. Prospective buyers are pivoting to the rental market to wade out the rates and inflation issues. What does that mean for you as the investor? If you haven't already, and you should have been, you need to be buying properties to hold and rent.
We are still at a 2.7-month inventory here in Houston and nationally a 2.9-month inventory. I have to re-write this every time, just in case I get some newcomers to the blog. Jet Lending feels that a 3-month inventory is a balanced market, not a 6-month like you see on TV. What does that mean? It means properties are getting better to find out there statically. But it's also important to note that investors usually stay within the 1-3% of all real estate transactions. We buy the house that was inherited, the probate house, the house that basically looks like a missile hit it house. Our core inventory doesn't shift that much, but when inventory does rise, it allows us to negotiate better.
What is my opinion of this market... Strong. Investors who are prepared to buy and hold or even buy and flip and know its going to stay on the market longer, take longer to rehab, and cost more to rehab, are still going to come out ok as long as you project your numbers correctly. In my opinion, by the Spring of '24, and judging by what I am seeing now maybe Q4 of 23, you are going to see rates trickle a bit south of 5% and when that happens, you are going to see a purchase and refi boom that is going to make 2020-2022 look silly. You have to remember, according to ATTOM Data, just north of 80% of all the mortgages in the country are below 5% and 65% are below 4%. Those houses are literally off the market. But when rates start going south of 5% again, the people that wanted to move holding a 3.25% mortgage may start moving again. The people that are renting want to start buying again. Its going to be insane. Remember, when one listing is taken off the market (someone doesn't want to move and sell their house) 3 transaction minimum die. Someone doesn't buy their house, the people moving don't buy a new house, and whatever house they were moving into, that owner doesn't move and/or the builder doesn't make a sale. We have higher rates, inflation, and all these inventory issues and we still only sit at 2.7-months. Let that sink in. You are not seeing 7-months of inventory in this market. It hasn't even eclipsed 2.7-months in the past few months in the slow selling season. Now you throw competitive rates possibly this year or next, just don't say I didn't warn you. If you are the investor that is waiting for prices to go down, you may be waiting for some time.
So, I bring you data to evaluate for your investment plans. Do your due diligence. Some things you may agree on, some things you may not but one thing we can all get behind is you should be buying and being prepared to pivot with the market.
