Remember, the July report is for the stats of the month of June. In June 2022, home sales experienced the first decline of the year. Is this a concern? Well, this uptick of new home listings just put us at 2.0 months of inventory. Is that bad? 2 months of inventory is still pretty low. With the combination of the growth in value over the last few years, rising interest rates, and a still very low inventory of properties to buy, investors are looking at what may be in the future.
In June 2022, home sales fell 8.6% but this still is about 1.7% ahead of 2021 record setting volume.
You are seeing the higher valued properties, $500,000 to $1MM seeing a 22% year-over-year sales volume gain. $250,000 to $500,000 rose 2.4% but the $1MM luxury properties saw its first decline in 2 years being down 2.3%. What about homes below $250,000? Well there is not many to choose from, thats the issue. It's forcing the buyers market to try to purchase higher valued homes but if the income isn't there to support the loan, there is only one other option, rentals. July saw some softening of the FEDs rate hikes and saw a average interest rate for a 30-year fixed-rare fall from 5.7% to 5.3%. Though that was the biggest decline since 2008, the average 5.3% rate is well above the 2.67% rate seen in December 2020 so your buyers are seeing some sticker shock only due to how low the rates went. This may and is driving rents.
Why is that important? Well, if you are flipping homes, you may want to be more conservative on your ARV estimates and realize some of your comps in the last 6 to 12 months may already spiking your house out of contention after you repair it as interest rates climb. You never want to be the. most expensive house on the market nor do you want to just take the top of the market sales on your projections. Be more conservative on your flips and get with a team like Jet Lending to help you project what may or may not be on risk when you talk about finishes and values. Well, why else is this important. When home sales soften, rental markets boom. If you were ever considering owning short or long term rentals, you should get off the consideration train and jump aboard in my opinion. While SFH sales fell 8.6% the median home price climbed 13.2% and average prices rose 11%. What does this mean? Appreciation of your rental portfolio is still your biggest grower of personal wealth. Though sales may continue to soften, values may continue to climb sharply making your investment still worth more over the years as you pay the property down.
What about a recession? Remember, you can make money in all markets as long as you pivot with the market in which you are in. More millionaires are made in the down market than the up market. You just have to strategize your inventory. You should really be considering holding properties for rent and if that is just not for you, then you should start to consider longer holding times as the year progresses into the fall and winter where sales begin to soften statistically anyway.
Get with your Jet Lending team and lets go through what you are trying to do so we can make sure you are ready just incase you need to change directions.
July was the first month in three straight months that that 'Close to Original List Price Ratio' for SFH went from above 100% to 98.9%. That doesn't seem that alarming but it does shed some light on...
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...