In light of the current economic climate, a lot of people are wondering if we are on the brink of another housing market crash similar to the one we experienced in 2008.
If this is you, know this: It is not the same.
In fact, we’ve tracked the past six recessions since 1978, and examined their duration, the GDP decline, and specifically how Jacksonville's home prices fared during each period. Of these six recessions, five saw an increase in home prices in Jacksonville while only the 2008 recession showed a decrease. This was due to the housing market crash and relaxed lending practices - all other recessions were caused by external factors separate from real estate. From this data, it can be seen that 2008 was the exception rather than the rule.
There are some key differences between then and now that make a housing bubble incredibly less likely. Factors such as increased home values, a growing economy, stronger lending regulations, and a lower unemployment rate all contribute to the stability of today's housing market.
But most importantly, there would have to be a housing imbalance: a discrepancy between supply and demand. And fortunately for us, there are proven metrics that give a leading indicator of housing prices within the next 6 to 12 months: Months of Inventory (MOI).
# of homes on the market currently / # of homes sold the previous month = MOI
If there are between 6-7 Months of Inventory (MOI) available, normal home price appreciation is likely to be seen. Lower than 6 MOI shows that the prices may rise faster than average while MOI higher than 7 suggests slower-than-normal appreciation - even if there is not a crash. Jacksonville enjoyed an exceptional 25% home price increase last year due to its low MOI, which is unheard of. In fact, Jacksonville's average since 1982 is 4.6% per year.
Jacksonville offers an ideal balance of low property prices, high rental rates, and impressive appreciation - making it a very attractive option to investors. In fact, Redfin recently ranked it amongst the top 5 hottest markets for investing.
There are 4 key factors that set Jacksonville apart from other markets.
Many people don’t realize that home prices tend to appreciate steadily over long periods of time, leading to higher returns on their investments.
From 1982-2019, Jacksonville's house prices year over year rose by 4.6% on average, which is around 25% more than the average of markets similar to it (e.g. Dallas, Kansas City, etc.). The population growth rate of a city can be indicative of rent and home price appreciation in the long run. A recent U.S. Census report revealed that from 2017-2019, Jacksonville was the fifth fastest-growing large metro city in the country - with a growth rate of 3.6% over the previous year and an overall growth rate of 1%. This meant that nearly 75 new residents were welcomed into Northeast Florida every day during this period!
If you're looking to maximize your risk-adjusted returns, investing in affordable neighborhoods and real estate markets is key.
According to John Burns Real Estate Consulting, Florida has seen significantly higher home price appreciation over the past decade than the rest of the nation - and Duval County leads that state. Zillow Research recently released data showing that 9 of the top 21 fastest-growing neighborhoods in Florida are located in Duval County, with Lackawanna being number 1 on this list. Other notable neighborhoods from Duval County include Mixon Town, Magnolia Gardens, Kennel Club, New Town, and more!
For investors desiring to maximize their return on investment, it's essential to consider purchasing property in both the most affordable and highest appreciating markets.
A comparison between Jacksonville and Cleveland - two markets that investors often frequent - is a great example of this concept in action. Though investing $250,000 worth of properties in Cleveland may result in slightly higher positive cash flow compared to Jacksonville, Cleveland's historical average for home price appreciation rate is 3.2% per year - far lower than Jacksonville's 4.6%. Over a 20-year holding period, the investor who purchased his/her property in Cleveland would earn an additional $219,390 from home price appreciation. However, the Jacksonville investor would earn an extra $364,573: over $100,000 more simply because they chose the right market!
If you're looking for a great investment opportunity that promises to generate passive income, Jacksonville is the place to be!
Not only does the current market offer multiple advantages for investors, but there are many promising signs for the future of this Florida city. From suburban neighborhoods expanding their borders to large corporations building headquarters and a focus on downtown revitalization, Jacksonville is bound to experience population growth as well as additional opportunities for investments.
In order to make sure you're making an informed decision that will lead to increased ROI, it's important to take advantage of all the professional advice available when researching potential properties. Schedule a call with our team and let us help you reach your investment goals!
I love to talk about investing in rental properties! You’ll often find me hosting the weekly Not Your Average Investor Show, contributing to the JWB Real Estate Capital blog, and in our Facebook group connecting with the community & sharing insights.