Right now many are wondering how to invest their money, especially given the effect that the pandemic has had on the stock market. While you may think that this would be similar to the stock market, real estate prices have been affected very differently. This is exactly why people invest in real estate, the fundamentals are very different. The Wall Street Journal recently published an article detailing why housing is holding stead, with no signs of worry in sight.
Price and Demand Are Up
One of the most basic concepts in economics is supply and demand. In Texas, housing supply was already low. After the shelter in place orders were enacted, less homes hit the market while sales still occurred at a steady rate. This led to our already low supply of homes getting even lower. With low supply, real estate prices have gone up.
The National Association of Realtors, recently reported the median real estate price was up 8% vs. the same period last year. The Midwest (which includes Texas) was even stronger. This region saw prices increase 9.7%. While all the data isn’t reported for April yet, Redfin states listing prices are up 1% from last year. The data also shows that only 4% of sellers lowered prices in the month of April. This is decreased from 5.7% the same period in the previous year.
Shelter in place orders made viewing homes a little more difficult so we saw demand dip nationally about 34% in March. However, for April it was only 15% below pre-pandemic levels. This also includes areas in the Northeast and California which are under more tighter restrictions. When looking at Texas, demand is essentially at previous marks.
Again, Low Housing Supply
Before pandemic talks was all you could hear on the news, we were already seeing record low inventory. To hammer this home, Redfin shows that total listings are at a 5 year low!
It looks like most people selling are holding firm on real estate prices as well. In Travis county, 53% of homes were under contract within a month. It’s expected that demand will continue and supply will go even lower. With some construction and rehab lenders tightening up, we may not see more supply for awhile.
So What’s Next?
We see that most experts are thinking prices will hold, with a potential slight increase. Major data provider for housing, CoreLogic, predicts that we will see a 0.5% increase in housing prices. Fannie Mae has similar predictions as well. On our end we continue to see strong sentiment from borrowers. Many are looking for new projects and think they’re well poised for the future sale. End buyers seem to be optimist as well, as mortgage applications are on the rise (according to the Mortgage Bankers Association.
Real Estate Prices – The Takeaway
While the talking heads tried to say it early on, this nothing like the recession of 2008. That was CAUSED by real estate, the fundamentals are drastically different here. Supply and demand are incomparable. We think that with a huge constraint on supply the outlook is rosy. Combined with rising demand in Texas, many smart investors can capitalize right now. While there are many surprises being a flipper, this could end up being a good one for many. Feel free to reach out to Loan Ranger Capital as we’d love to help.