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Editor’s Note: Dennis Fassett is a former corporate finance executive turned real estate investing “Cash Flow Mercenary.” Dennis specializes in single-family and multi-family cash flow properties and thoroughly enjoys assisting his fellow investors with their own strategies, including how to buy your first apartment building.
As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Fassett provides us with his own unique, lively, and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out his other super-helpful Market News Updates. For now, enjoy...
From Dennis Fassett, Cash Flow Mercenary...
Well it appears that the overall real estate market successfully dodged one bullet already this year.
And that’s the volatility in the stock market.
There’s no question that the stock market and the overall economy was poor in the fourth quarter of 2015 and continued on that same path in 2016. Earnings reports are predicting an economic slowdown, Walmart closed 269 stores and let go over 10,000 employees. All Walmart Express stores were shut down. Oil fell under $30 from it's old high of $140. Christmas sales were miserable. Industrial production keeps falling. Business inventories keep rising due to poor sales. And the New York Fed threatened to institute NEGATIVE interest rates.
Not a good start out of the gate by any means.
But, after the books were closed on January, none of that stuff appears to have negatively affected the housing market. At all. According to Realtor.com that is.
The online real estate marketplace says a preliminary analysis of data shows the market turmoil hasn't dampened the pent-up demand that lifted sales in 2015. True, there was cooler demand in January, but the site says that's typical.
Jonathan Smoke, chief economist of Realtor.com wrote that:
“Our initial readings on January affirm the positive growth we expect to see in the residential real estate market in 2016.”
And that:
“Our traffic, searches and listing views exhibited the January ‘pop’ we saw last year, which made for a strong spring. In addition, a large number of prospective buyers have been telling us since the second half of 2015 that they plan to purchase in the spring and summer of 2016.”
Based on the website's traffic, Smoke says the spring could be an active home-buying season. January median list prices are expected to show a substantial increase year over year, despite a slight decrease from December.
Moving Faster
In spite of rising prices, the company says homes are selling 4% faster this year when compared to last year. Yearly inventory is 1,510,329 while monthly inventory continues its seasonal decrease. Buyers are encountering tighter supplies and fewer choices.
“All indicators point to this spring being the busiest since 2006, but we’ll need to see inventory grow more robustly this year to satisfy these buyers,” Smoke said. “The decline in the stock market so far seems to be a net positive for real estate demand. Fixed 30-year mortgage rates are now about 25 basis points lower than at the end of 2015 as a result of the financial market weakness. That extra buying power appears to be offsetting any weakness from buyers whose stock-related losses impair their ability to buy.”
The median listing price for January is estimated at $227,000, an 8% increase year over year and virtually flat over December. Prices, of course, are significantly higher in the hottest markets.
San Francisco hangs onto the top spot as the nation's hottest housing market, as California maintains its dominance with seven of the top 10 markets and the majority of the top 20. Nashville is the biggest gainer, moving up six spots to #7. Texas and Florida now feature multiple markets in the top 20.
From the demand side, Realtor.com says the hot markets get two to five times the number of views per listing compared to the national average. From the supply side, these markets are seeing inventory move 30 to 50 days more quickly than the rest of the U.S. They have also seen days on market drop by a combined average of 7% year-over-year.
The real question is, can the market hang on and continue on this pace with the economy seemingly set to decline again? Time will tell.
What Do You Think?
Weigh in below in the comments section.
Dennis Fassett
earned a BS in Economics and followed that up with an MBA in finance. After working and corporate finance and banking for several years, he started buying single family houses, and quickly built a very nice portfolio of cash flowing rentals. When the credit markets started to dry up and he couldn’t get any additional single family mortgages he shifted his focus to apartment buildings. He now has over $3 million in rental real estate. He manages most of it his self and still has a day job. Dennis has even created his own Private Equity fund to buy apartment buildings.