Real Estate Climate: Investment Home Prices Trump Traditional Home Prices.
We’re in the midst of an unusual real estate market, and smart investors are taking advantage. Inventory is low, which under normal circumstances would inspire climbing prices. But that’s not the case. This the time of year when demand is also rather sluggish and this is keeping home values somewhat static for the time being. Conditions are ripe for investors looking for rental properties or homes to flip, likely from now until the end of the year.
Median prices for investment housing are growing at a faster rate than owner-occupied home prices in July, according to the new HomeUnion Home Sales Report. Prices for investment housing – both financed and all-cash – jumped 7.1 percent to $213,300, while the median price for owner-occupied homes increased 4.0 percent to $274,500 in July.
“Investor demand for single-family rentals (SFRs) remains strong, as evidenced by the overall decline in cap rates in July,” explains Steve Hovland, director of research for HomeUnion. Cap rates for all types of investment housing dropped 50 basis points to 5.1 percent, cash cap rates retreated 60 basis points to 6.0 percent and leveraged investment cap rates declined 20 basis points to 4.4 percent.
“Overall, the housing market remains solid, although we’ve started to see evidence of moderating price growth nationwide,” says Hovland. “This slower price growth is correlated to the seasonality of the housing market: we’re are coming off a frenzied spring buying season that is beginning to cool.” Although home prices are expected to decline in the fall months, the overall supply/demand imbalance will keep values elevated and many first-time buyers on the sidelines. As a result, downward pressure on the already record-low homeownership rate will persist through the end of the year.
Here are more details on the current state of the U.S. housing market:
