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...
The real estate news has been nutso lately.
I read a couple of articles that showed just how wacky things are getting. This is from the first one:
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After starting the year at the fastest pace in almost a decade, existing-home sales slid in February by 3.7%.
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On one hand, the median existing-home price in February was up 7.7% from last year and was the fastest increase since last January.
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On the other hand, affordability has collapsed, which together with too little inventory of homes for sale, lead to the 3rd worst month in the past 6 years.
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Total housing inventory at the end of February increased 4.2% but is still 6.4% lower than a year ago and has fallen year-over-year for 21 straight months.
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All-cash sales were 27% of transactions in February (matching the highest since November 2015), up from 23% in January and 25% a year ago.
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Individual investors purchased 17% of homes in February, up from 15% in January but down from 18% a year ago.
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And, 71% of investors paid in cash in February, matching the highest since April 2015.
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First-time buyers were 32% of sales in February, which is down from 33% in January but up from 30 percent a year ago.
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Properties typically stayed on the market for 45 days in February, down from 50 days in January and considerably more than a year ago.
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Short sales were on the market the longest at a median of 214 days in February, while foreclosures sold in 49 days and non-distressed homes took 45 days. And 42% of homes sold in February were on the market for less than a month.
More Insight
The second article posted some other good observations on the contradictions in the market:
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Existing home sales – down
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Pending home sales – down
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Affordability (as rates spike) – down
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New home sales - up at 7-month highs
One analyst suggested that weather played a big role by the look of it, as Northeast sales fell 21.4% month over month while sales in the Midwest increased a whopping 30.9% month over month.
The first article added some thoughts from NAR on the collapsing affordability as a result of rising rates, and the nearly double-digit increases in home prices…
NAR said that:
"The affordability constraints holding back renters from buying is a signal
to many investors that rental demand will remain solid for the foreseeable future."
And that:
"Investors are still making up an above average share of the market right now
despite steadily rising home prices and few distressed properties on the market,
and their financial wherewithal to pay in cash gives them a leg-up on the
competition against first-time buyers."
They concluded that, judging by the collapse in mortgage apps and rising mortgage rates, unless all cash buyers continue to buy up existing homes without resorting to mortgages, we should expect a sharp drop off in the supply of existing homes in the near future.
You get all that?
Leave your questions and comments about all this information below.
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.