When we know what is going on in the national and statewide real estate market, we are better equipped to make lucrative investment decisions. It is our goal to help our landlords and investors to do just that. Our company looks, in part, to CoreLogic to help provide reliable data about the state of the real estate market. CoreLogic is a leading provider of property data, information, and analytical services in the United States.
They have released their November U.S. Home Price Insights report which analyzes market data through September 2017 and includes forecasts from October 2017. Let’s take a look at some of the highlights and then we will see what this data means for you.
Current Real Estate Market Data
We have seen a national home year-over-year price increase of 7 percent from September 2016 to September 2017. There was a nice 0.9 percent increase in sales in comparison to August’s activity. North Carolina, however, isn’t a front runner on these figures, but we came in solidly at 5.05 percent price growth but only a 0.16 percent increase over August, 2017. Denver, Las Vegas and San Diego are leading the way in metro year-over-year price increase of 9.7, 8.4 and 7.9 percent respectively.
Frank Nothaft, the Chief Economist at CoreLogic, commented on his findings. “Heading into the fall, home price growth continues to grow at a brisk pace. This appreciation reflects the low for-sale inventory that is holding back sales and pushing up prices. The CoreLogic Single-Family Rent Index rose about 3 percent over the last year, less than half the rise in the national Home Price Index.” If we look at the North Carolina market, we can see strong evidence of a lack of residential inventory. Based on the North Carolina Realtors October 2017 report, there is only 3.31 months worth of inventory compared to 4.34 months in October 2016 and 5.78 months in October 2015. This equates to an annual reduction in inventory of nearly 25 percent. This explains the increased demand, quick listing periods and steady price increases.
Real Estate Market Assessment
The President and CEO of CoreLogic, Frank Martell, holds to his last assessment that “a third of metropolitan markets are overvalued.” He also added that “this will become more of an issue if prices continue to rise next year as we anticipate.” How about major markets in North Carolina? Well we took at look at their Market Conditions Indicators (MCI) Metro Area Maps and this is CoreLogic’s findings as of September 2017:
- Greenville: Current Condition: Undervalued > Projected Condition 2022: Normal
- New Bern: Current Condition: Normal > Projected Condition 2022: Normal
- Jacksonville: Current Condition: Undervalued > Projected Condition 2022: Normal
- Wilmington: Current Condition: Overvalued > Projected Condition 2022: Overvalued
- Raleigh: Current Condition: Normal > Projected Condition 2022: Normal
- Goldsboro: Current Condition: Undervalued > Projected Condition 2022: Undervalued
Forecast of the Real Estate Market
The forecast trend that we have been watching seems to remain steady. Advisors are expecting value appreciation to slow down and level off. The CoreLogic HPI Forecast “indicates that home prices will increase by 4.7 percent on a year-over-year basis from September 2017 to September 2018.” This will be only slightly higher than inflation.
Real Estate Investment Recommendations
To be honest, there is no evidence in these reports or in other market research that we have compiled that indicates any need for alarm, immediate action, or concern. The market has fully recovered from the 2008 housing recession. This is a primary reason we are seeing such unsustainable increases in property values. We are, however, quickly approaching the next cycle in which values will level off and increase slightly more than the inflation. There is no evidence projecting any sort of loss of value over the next few years.
So, what does that mean for you as a multi-family or single family investor? Well, if you are thinking of expanding your portfolio, then this is a fine time to do that. The winter sales season brings slightly lower list prices. Lending rates remain favorable. Your problem will probably be a lack of supply, so some patience and perseverance will be in order.
If you are considering reallocating your portfolio perhaps by selling some of your single-family properties and reinvesting into larger multi-family investments, then feel free to pursue this option as well. Though you may want to wait until the spring to list your properties. If you do this, then you can capitalize on the increased seasonal activity. There is a high demand for single family properties so you may want to spend the next few months getting the property ready to be sold to a homeowner rather than an investor.
In our next week’s article, we are going to take a closer look at the North Carolina multi-family market. You will not want to miss that.