As you know and your bank accounts have witnessed the real estate market has been at an all-time high and we don’t see it slowing down in the coming months. The details discussed below are important to real estate investors and what it means for their future portfolio. So, let us dive into the numbers and the fundamentals of the current housing market.
In May, the median sales price in the United States hit $350,000 for the very first time in history. This represented a 24% jump over last year, with year-over-year gains occurring for the last 111 consecutive months.
The 24% gain that we are seeing from last year, is the largest year-over-year gain that has occurred since data started to be collected by the National Association of Realtors in 1999.
The increase in home prices is impacting the total sales volume of homes that are being sold. Existing home sales have dropped for the 4th consecutive month. As investors, you want the market going in the other direction. Homes are less affordable and as a result decreasing sales volume. There are not enough homes for sale to keep prices lower and to get people buying more consistently.
Here is the good news – although sale prices are on the rise. The industry has seen an increase in inventory for existing homes by 7% and new construction homes by 5%. New data and inventory patterns like this should help temper price increases. But it is going to take significant increases in the housing inventory to truly change the dynamics of the current housing market.
For investors, the current rise in sales prices may remain the same for at least the majority of 2021. We encourage you all to think about the long term. Despite rising sales prices and lower inventory, the fundamentals of rental property investing have not changed. If you can find a cash flowing deal, lock in the historically low interest rate while keeping a significant cash reserve to weather any short-term cash flow problems.
Rental property investing still offers investors good returns as long as you are in it for the long run. No matter if you are a short-term or long-term investor. Do your homework, build solid relationships with your network including your lender. It’s important to have people on your side to weather this storm together.
Thank you to Bigger Pockets for the statistically information used in this article.