Whether you invest in commercial real estate or residential real estate, there are endless ways to participate and hopefully profit in real estate investing. Staying on top of current trends and statistics in the real estate market will help make you make more informed real estate investment decisions. Take a look at 10 real estate facts all real estate investors should know right now about the real estate industry.
1. September saw the fastest increase in home values since 2005
According to a recent study by Zillow (NASDAQ: ZG) (NASDAQ: Z), property values rose 0.8% in September alone to $259,906. This is the highest single-month increase since the mid-2000s "boom." Every major metro saw an increase in median home value, ranging between 0.5% to 1.5%, with the highest increases being in Phoenix; San Jose, California; and Seattle. Median list price nationwide is up 11.7% year over year as of the first week of October 2020.
2. Housing starts are up 11% from last year
The most recent U.S. Department of Housing and Urban Development (HUD) and Census Bureau numbers found September new housing construction is up 11.1% when compared to September 2019. Residential new home starts have been on the rise since midsummer, with a 1.9% increase from August 2020.
3. Apartment rental collections are down just 2% from last year
According to the National Multifamily Housing Council (NMHC) monthly rent tracker, rental payments are only down 2% from the same month a year prior. September's month-end rental collections were at 94.6%, and September 2019 saw a 96.6% collection rate. Rental collections have gone down slightly since July 2020, with June having the highest collection rate out of the past six months.
4. Raw profits and return on investment are at their highest points since 2012
A recent study by ATTOM Data Solutions found home sale profits and return on investment (ROI) are at their highest points since 2012, providing an average profit of $85,000 from a home sale, representing a 38.6% average home profit. St. Louis saw the highest annual profit margin increase of 14.7%. The highest total home profit remains in the West, including San Jose, California (89%); Salem, Oregon (74%); and Seattle (73%).
5. There are over 2.3 million mortgages 90-plus days delinquent
According to Black Knight's (NYSE: BKI) September 2020 report, the national delinquency rate was 6.6%. Over 2.3 million homeowners were 90 days or more delinquent. This is a slight decrease from previous months, making it the first month where delinquency rates have improved since the start of the pandemic. High mortgage delinquencies can ultimately affect mortgage REITs, lead to banks selling nonperforming loans, or increase REOs or short sales.
6. Sales volume is up over 50% for industrial real estate
A recent study on commercial property sales volume from Real Estate Solutions (REIS) by Moody's Analytics (NYSE: MCO) found a 50% increase in sales volume for industrial real estate in second quarter 2020 on a national level. Multifamily, office, retail, and hotel volumes fell between 35% and 45% of last year's figures.
7. Mortgage rates are at the lowest point in history
Mortgage interest rates are at record lows, at an average of one percentage point lower than interest rates over the past year, according to Freddie Mac (OTCM: FMCC). This means a homebuyer today can afford approximately $33,250 more than they could a year ago.
8. Home equity is at its highest point ever
Percentage home equity is at its highest point ever, with homeowners holding around $20 billion in equity as a whole, according to the Federal Reserve Bank of St. Louis. High home prices, when combined with low interest rates, provide the opportunity for 17.3 million Americans, or 34% of active mortgages, to potentially qualify for a lower rate by refinancing.
9. Rental concession rates are on the rise; rent growth down 1.4%
Rental income in many markets is declining. According to Apartment List's national rent index, rental rates are 1.4% lower than they were a year ago. Rental concessions are also on the rise. Fannie Mae (OTCM: FNMA) found 16% of all multifamily real estate investments were offering some sort of concession in May 2020.
Bigger cities are being disproportionately affected by lower rental rates and demand, with 41 of the top 100 cities seeing a decline in rents, says Apartment List. Right now, New York City is offering as much as two months' rent free.
10. House flipping profits are up, but number of flips is down
House flipping real estate transactions made up roughly 6.7% of all home sales in second quarter 2020, according to ATTOM Data Solutions. This is a slight decrease from previous 2019 highs. While there's less activity, those flipping currently are realizing higher profits, an average of $67,902, or 41.3% ROI.
The Millionacres bottom line
Fortunately for real estate investors, data is driving our modern world. Useful real estate statistics like these can help provide insight into the market today and a better understanding of where risk and opportunity may lie.