Investor Intel: Bust Out Your White Pants
Today marks the first long weekend of the summer season. Those of you reading from the east coast are likely breathing a collective sigh of relief that the warm weather seems like it’s here to stay and it’s finally appropriate to wear those white pants.
The temperatures aren’t the only thing heating up. Pending home sales are also on the rise. In fact, pending sales increased for the third straight month in April, surging to the highest level in a decade. According to the National Association of Realtors, The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 5.1% to 116.3 in April from an upwardly revised 110.7 in March. It is now 4.6% above April 2015 (111.2).
“The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets,” said NAR chief economist Lawrence Yun. “The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market.”
New home sales are also enjoying a bit of a moment. U.S. Census Bureau and HUD estimates found that new single-family home sales in April 2016 were at a seasonally adjusted annual rate of 619,000, a 16.6 percent increase from March’s rate of 531,000, and up 23.8 percent from last April’s estimate of 500,000. Realtor.com chief economist Jonathan Smoke noted that the growth in sales appears to be coming from higher price-points, indicating much of the volume isn’t coming from entry level buyers. “Hopefully this will free up existing home owners to sell their lower priced homes as they move up,” he said.
While this is all good news for housing markets across the country, it might leave rental investors in a bit of a squeeze. Not to worry though, as there are a number of markets still showing some opportunity. According to the Q1 Single-Family Rental Market Report from RealtyTrac, counties in Baltimore and Atlanta are among the best markets for buying single-family rentals because of the high yields found there. For more ideas on where to invest, refer back to our blog post on to study.
If none of these markets are near your home base, property management could ease the burden of getting into unfamiliar territory. According to a new survey from Buildium (a property management solution – so take these findings with a grain of salt), 51 percent of surveyed property owners already have a property manager, with an additional 24 percent indicating they are searching for property management in 2016.
Summer is for sprucing up your rentals and expanding your portfolio, so we’ll leave you with this juicy data point from the Buildium study: Rental property owners who have expanded their portfolio in the past five years are 65 percent more likely to experience further expansion by 2018. In turn, 58 percent of those who have remained stagnant are likely to remain so, and 68 percent of those who have shrunk their portfolios are likely to continue to contract.
Happy Memorial Day weekend everyone!
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