Market Watch – Is the sky falling?
Brian Hall –
The most constant question I get from my investor clients, well everyone really, is some version of: “are we entering a market turn, have I missed the boat, etc” I constantly scour for info on this subject as it is almost impossible to see the overall market shift until you are already in it or past it. Richmond is such a unique environment when compared to the national market, that we have a lot of isolation from some of the downward pressures being seen in other parts of the country. High employment and new job numbers keep new people coming here daily, and our burgeoning young professionals demographic has been exploding over the last 3 years especially, and they all need somewhere to live!
Looking back at the last 12 months, we can see the overall trend has remained stable in comparison to the last few years. While there is concern that overall economic sluggishness has been hidden from view in the real estate market and is only now beginning to show itself, I believe we are seeing more of a natural pull back from the heights of the last 24 months.
For the purposes of this discussion, I am referencing single family home stats secured from the CVRMLS RE data system.
Looking at sales both over the last 12 months and for October 19 vs 18, the market has trended up in both sales and average price. The rolling 12-month period from November 2018 to October 2019 was up in total sales 5% compared to the previous period, and October 2019 was 9.55% above October 2018.
Sales prices are up as well, with the rolling 12 months showing 4.7% and October showing a 4.9% gain over last year.
Other indicators show avg days and median days on market up slightly as well as list to sales price dipping slightly over the same periods; while also showing 12% less overall number of homes sold in 2019 vs 2018 for October.
I believe, when looking at the data, in a cautiously optimistic viewpoint for the coming 6 months. Inventories are down still, and it is possible that many sellers followed our advice and sold over the last 18 months or refinanced and are staying put. I have seen from just anecdotal evidence, that we seem to have a “new round” of buyers out there right now who are just now getting started either preparing their home to sell or buy, and it seems like we are transitioning away from the frenzy of spring and summer.
For just about 3 years now, I have been looking for clear indicators that the market will trend down over the next 12 months, but even with the latest information showing slowness, my gut is that this is more seasonal than an overall market adjustment. My call is that the market will remain stable, with the outlier properties potentially taking a big hit, but with the more traditional home types and neighborhoods staying at or moving slightly up in value with days on market trending mostly sideways with only nominal upticks.
Best advice: Buy for the long haul when you are investing. Always have plan a, b, and c. With that as a foundation, then no market shift will impact you negatively, it will only increase the time to return the investment. Look for homes to purchase in secure areas, supported by years of data. Stay away from the newest areas that may have had years of suppression and have lately seen huge increases. These are the areas that will revert to the mean and in doing so could hurt investors looking to flip.
I maintain a small list of target properties based on daily reviews of new homes that hit the open market and our office has relationships with many investors in the area who look to offload properties fast, so please remember to reach out to us if you are actively seeking homes to purchase for any type of investment, short term rentals, long term rentals, as well as flip projects. We offer full concierge service for our clients. We can partner with you to manage your project from start to finish, as well as manage and rentals in house. If you are not on our client list, why not? Call me for details