I had a fun conversation over text with a family member the other night. After reading “Where Have All the Houses Gone?” from the New York Times, they asked me: “Should I be buying rental properties?” Of course, I said yes! Absolutely you should be taking advantage of the real estate market! Whether that entails buying properties to rent or embracing a flipping model is up to the individual. There are pros and cons to each.
I’ll start with an aphorism: cash is king. Cash has always been king in real estate: ask any agent what their ideal offer looks like and they will all say “CASH!” Cash offers can close whenever and don’t have to deal with lenders, who can be moody and mercurial. Everyone prefers to work in cash whenever possible. If you are liquid enough to put some of your money into houses, now is the time to do so.
"All listings with at least one price drop from original sold in an average of 88 days at 96% of asking price. "
This is a quote from January’s TARR Report, one of my sources for local market data, and the primary basis for my monthly market review videos. Keep in mind that this includes the entire TMLS, which reaches out to places like Johnston County and Efland.
Non-pandemic-friendly housing aside, this is illustrative of the fact that pricing still needs to be strategic. I’ve heard rumors that pandemic-friendly housing is heading towards such a high demand where sellers can sell in any condition and ask top dollar as if it were new and modernized. We aren’t there yet. Agents still have to price competitively and appropriately for the condition, location, and type of housing they’re selling.
“Resale listings with no price drop sold in an average of 16 days at 101% of asking price.”
This is the meat and potatoes of what matters to you, a potential local real estate investor. Properties with price drops aren’t single-family or town- homes in the suburbs. Single-family or town- homes in the suburbs are these resale listings. I’ll bet you dollars to donuts that the only reason that “days on market” count is 16 is because of the luxury portfolio homes ($750,000 and up) that take so long to negotiate contracts.
ITB has become a donut hole in my mind. I wouldn’t take a listing in downtown Raleigh if they paid me. As a real estate professional, I do not want to take on the futile effort of trying to sell housing in a high-density area while a virus that thrives on density is making the rounds. My time, as well as my customers’ time, is better spent focusing on properties that will improve folks’ quality of life and get them to a state of functionality in their lives.
This leads us to the "cake" of the donut; between 440 and 540. Based on the way consumers have been behaving in the past calendar year, this is what I’ve identified as the sweet spot for pandemic housing. All of those little blue bubbles represent houses that have easy access to both the Beltline and 540; local amenities; everything a consumer would need to raise, educate, and feed their children from home while working remotely themselves. This is where the money is.
Those bubbles represent houses meeting the following criteria:
Time for a throwback to high school algebra. This chart represents data on all those properties inside the donut. Along the top, we have the number of bedrooms and bathrooms; year built; how far over (or under) list price (LP) the sale price (SP) was. Days on Market, the listing price, listing price per square foot, and finally sales price per square foot. On the left, we’ve got rows for the average, minimum, maximum, and median values. Feel free to pause the video here and look more closely at the numbers.
First, I’d like to address the outliers. 114% over asking price represents a Cape Cod single-family resale listing in Stonehenge, a very hot area in North Raleigh off Creedmoor. They severely underpriced it to begin with given how beautiful and modern it is, and they got into quite the bidding war, thus driving the price significantly over asking.
138 Days on Market represents a 2018 custom built single-family in Apex that is within the disclosure radius for Shearon Harris and backs up to a road that is going to be widened soon. They had to be patient for a buyer willing to move into someone else’s idea of custom, as well as the potential headaches surrounding the property.
Lastly, 87% of asking price represents “a mountain retreat tucked away in Cary! No city taxes!” Which is all fine and good until you realize that it is on a well for water and a private septic tank for sewer, they left a weird tile kitchen countertop that was ugly even when it was trendy, and the place hasn’t been deep cleaned in a dog’s age.
Now, the good stuff. On average, properties inside the donut are selling for more than asking price. I really wish that 13% decrease in price wasn’t in there gumming up the works, because on the raw data sheet there are a lot of sales 1-6% over asking. A median single-digit days on market count is excellent; in addition to selling for a lot of money, these houses are moving fast. 3 days on market means they spent 2 days negotiating the bidding war.
There is no shortage of opportunities to make a great return on houses right now. The Brit’s colloquialism “safe as houses” has never been more accurate. Identifying properties within this suitable location as well as in a suitable condition for profit can provide quite a return over what your money would be doing for you in a market right now.
If you or anyone you know is curious about using their assets to both contribute to local inventory of pandemic-friendly housing and earn a comfortable return on their money, give them my number. Local, personal investors can go a long way to increase property values and quality of life for their neighbors in ways that big investors like Zillow can’t. Come be part of the solution with me.
Case studies available on request.