The Real Estate Investor Taking on the Inventory

Real Estate Investors vs. Low Inventory

In today's real estate market in the Brazos Valley we are experiencing all time lows in our market inventory. Currently we have a supply of only 4-5 months worth of homes available. This means that if no more homes were to be listed for sale, we would be completely out of properties for sale in 4-5 months. That number is down 43% from this same time period last year - we were between 8-9 months of inventory in 2013. This indicates we are in a strong seller's market and homes would expect to be sold at a premium, especially nice updated homes in the most desirable locations.  The owner occupant would be expected to pay the most for their home during this time and a potential seller would be most likely to sell their home for the highest in the recommended range. The basic economical law of supply and demand is ever present here with the same number of buyers in the market looking to purchase (maybe even more than usual - bio-health corridor, Eagle Ford shale oil drilling, booming commercial economy) but with a limited supply of homes to go around, driving the average sales price per square foot upwards towards numbers certain neighborhoods have never seen. 

So how does this effect the residential real estate investor? In any investment strategy, there is the acquisition phase, the growth phase, then the exit strategy. For any investment, you do not go into the scenario with out having a defined exit. So depending on strategy, this may be the worst time to buy in to the real estate investment market. Remember the old adage 'buy low, sell high'? If you are looking at a buy and sell situation (i.e. flipping a property) you would be expecting to pay a premium for the real estate you are looking at acquiring not leaving much room on the back end of the transaction to make any money. If you have been holding on to that investment and are wanting to maximize immediate return, the time to sell would be now. If your strategy is to buy and hold (i.e. rental income) you could still accomplish that but your entry price point will be at an all-time high comparatively. Luckily our market has not over inflated the home values and we are still seeing an annual taxable value growth between 1%-5% over a 5-year span. So the investor could expect the property to at minimum maintain it's value while drawing all time highs in the rental market. So with the limited inventory the selection of properties goes way down, there are much less "deals" available, and the investor is now competing with a potential owner occupant who may have emotions attached to the transaction effectively pricing the investor out of the equation. Also, this makes the likelihood of an owner occupant to look into REO properties increase and they have the priority over an investor when purchasing REO properties. 

If you have a property you would like to sell or if you are interested in hearing more on how real estate investing may be a good option for you, give us a call today at 979.224.0405 or visit www.BuyingAggieland.com


JT