It is time for a summer market update, and this time, we are focusing directly on investors. Over the past 12 months, we have helped a lot of clients either sell a home and reinvest or leap into their first real estate investment.
Let’s be clear: It is definitely still a seller’s market. However, there are three key market indicators that we want to focus on:
1. Inventory. Inventory is directly correlated to price and how we track the state of the market. Over the past couple of years, we have noticed that in the first part of the year, there is a lot less inventory and that prices tend to increase. As the second part of the year approaches, we see more inventory appear on the market and the prices tend to decrease. In fact, just last week we saw almost 40% of all active listings have a price reduction. With more inventory on the market, it allows for more options for buyers to choose from and reduces the competition.
2. The rental market. In our neighborhood, new construction apartment complexes are popping up everywhere. On one hand, this could raise concerns about flooding the market. However, we need this form of housing, and if you look at what permits are being pulled in the city of Portland, you can see that there will be a lot less in the future. It is just a bit of a boom we are going through right now; I do not think we will end up oversaturated.
3. Interest rates. When I bought my investment property, interest rates had just ticked up slightly. That little increase really affected how I had to look at my numbers—what my monthly payment would be and how much I could rent it for. You will typically pay a little bit higher interest rates, so you will want to know your break-even point and what would be the most worthwhile option. That point could be close, so if you are interested, now is the time.
A study from the MLS that was released a couple months ago tracked the five-year trend on home equity increases, and in that five years, they discovered that on average, the homeowner increased their equity by $121,000—that is effectively adding a whole new income to the household. Though it may take about 10 years to get that point, who doesn’t want that?
If you are interested in learning more about investment, reach out to us. We are here and ready to help you.