It's another month and Jet Lending is offering our evaluation of the October 12th HAR report. We like to give opinion to the trend so you as the investor can make changes to your business to what is going on in the market. that the continual trend to the pandemic levels are continuing. This continues on from the previous 2 months where you have seen a normalizing in real estate transactions and values but we haven't seen what some are calling a crash. As we said in past blogs, the crash already happened, we have had an inventory crash for some time now. According to HAR "sales overall were off for a sixth consecutive month due largely to the persistent lack of inventory and inflationary headwinds that include raising interest rates". As the market continues to normalize, the inventory is steadily growing and is the highest level in 2 years.
Here are some of the statistics mentioned in the report:
- Single Family Home sales fell 17%
- 7,664 units sold compared to 9,235 units sold in September of 2021
- the market trails 2021 record setting volume by 5.1%
The top SFH type that is selling is the $500,000 to $1,000,000 price range. This price range rose 12.6% and above $1MM rose 7.2%. In the investment world though, not too many of your properties are falling in this range and as consumers are looking to see where interest rates are going and what is happening in the political sphere, many consumers are turning to rentals due to the lack of inventory of properties listed below the $400,000 range. As an investor, you should really be pivoting your business plans on the rental and possible owner finance options in these price ranges.
Appreciation is still here in our market as seen with an 11.6% increase in September with the average price of a SFH at $414,776. The record was in May 2022 at $428,284. The median price rose 14.7% to $343,950.
This is something to watch in the next coming months though as active listings rose 36.3% and we are currently in a 2.7-months of supply. "That is the highest level since July of 2020 when it was 2.9 months" according to HAR. Nationally, housing sits at 3.2-months supply. There are some that believe a 6 month supply is balanced, but at Jet Lending, we feel 4 months is balanced and 6 months is well into a buyers market.
Well, how does this compare? In September of 2022, sales are still up 8.7% compared to September of 19 pre-pandemic. Back then, the median price was $244,679 and the average price per home was $299,600. Sales are also 10.2 % higher than September of 2017. Why do we add this? Perspective of the market you are in. Remember, you are an investor of real estate and no matter the market, its profitable, you just need to pivot your strategies and understand the trends and risk.
One of the last indicators is Day on Market (DOM). The DOM has grown last month from 29 days to 37 days. That doesn't sound like much, but, as an investor who flips properties, you have to calculate your holding cost and know that the trend is moving upwards. As you calculate your profit margins on projections, you have to always put in the worst case scenario so you know you are financially stable in this investment. So, that is 37 days on average plus the time you are renovating the project. A good rule of thumb is about $7,500 a week for a time frame of how fast a project is going to take but more importantly talk to your contractors and make sure you have a firm idea on time frames so you can plan your projects.
If you need help planning your next moves, projecting in the market, or just need help getting started in this market, give us a call so we can go over what you are planning and see how we can help you grow your business and wealth.