Norada Real Estate Investments

San Diego Real Estate Market: Prices, Trends & Forecast 2022-2023

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Is San Diego Housing Market Slowing?

Home prices & sales are moderating in the San Diego housing market. While gains are diminishing, it is improbable that prices will fall precipitously in 2022. Supply and demand fundamentals continue to favor an expensive housing market like San Diego. Housing prices in San Diego continue to rise, but the rate of increase is reducing as compared to the previous year.

Because mortgage financing has gotten more expensive as the Federal Reserve raises interest rates, record home price increases may not last much longer. Despite a still-strong housing market, rising mortgage rates are plainly making it more difficult to buy in a market that already has some of the highest prices in the country.

According to the latest C.A.R. report, in San Diego County, the median single-family home price increased 6 percent to $885,000, while sales fell 27.7 percent year over year. August's median price was 4.8 percent lower than July's median price of $930,000. Inventory is still low and thus prices are rising as compared to last year in the San Diego housing market.

The housing demand in San Diego has also been driven by the desire for additional space as people spend more time at home. Housing prices in San Diego County have risen dramatically in the past year due to lower mortgage rates which allow buyers to put more of their monthly payments toward the principal. The record-low interest rates in 2021 fueled San Diego's high house prices, increasing consumer purchasing power. Since Q3 2021, interest rates began to increase, leveling buying power and reducing homebuyer urgency.

San Diego County's median home price has dropped by 4.8% from last month to $885,000. It is a growth of 6.0% over last year, according to C.A.R.'s August 2022 resale housing report. The report also shows that existing single-family home sales also declined by 27.7% YTY. Sales bounced back by 16.3% from the previous month. San Deigo's condo market also saw a sharp increase in the median price as compared to last year. The condo's median price was $617,000, +11.2% YTY and -1.3% MTM. Last year at this time the median condo price in San Deigo was $555,000.

  • The median price of a one-bedroom house in San Diego County is $497K.
  • The median price of a two-bedroom house in San Diego County is $651K.
  • The median price of a three-bedroom house in San Diego County is $799K.
  • The median price of a four-bedroom house in San Diego County is $1.20M.

Months Supply of existing single-family homes is currently holding at 2.5 months while for condos it is 1.9 months. It is a good indicator of whether a particular real estate market is favoring buyers or sellers. Typically, a market is considered balanced if it has 4 to 6 months of inventory of homes on hand. A lower number means that buyers are dominating the San Diego housing market and there are relatively few sellers.

According to a survey, San Diego has the nation's most costly housing market. That is not to say we have the most costly residences. San Diego edged out San Francisco as the least cheap city in which to buy a property. This is because earnings in San Diego have not kept pace with increasing house prices. San Diego County covers an area of 4,526 square miles making it larger than Delaware or Rhode Island and 82% the size of the state of Connecticut.

The San Diego housing market is cooling off. Numerous home market analysts link the cooling to the housing cycle as well as unusual conditions such as a hot market during the prior pandemic. Rising interest rates are among the primary causes of the cooling housing market. To combat inflation, the Federal Reserve has been increasing interest rates. These interest rate increases prompted lenders to increase mortgage rates, so affecting affordability.

Housing analysts believe that San Diego's housing market will heat up again in the future because of increased demand from the military, tourists, and a large influx of tech industry. Despite the cooling, San Diego County remains a seller's market, according to the most current Realtor.com statistics. In other words, there are more buyers than houses for sale on the market.

Home Prices in San Diego County, CA

  • In August 2022, the median list price of homes in San Diego County was $860.5K, trending up 11.7% year-over-year.
  • The median listing home price per square foot was $554.
  • The median sale price of homes was even higher at $800K.
  • Homes in San Diego County, CA sold for approximately the asking price on average in August.
  • It is a seller's market as the total sales to total listings ratio is above 0.2 which tends to favor sellers.
  • It also means that more people are looking to buy than there are homes available.
  • There are 67 cities in San Diego County.
  • La Jolla has a median listing home price of $2.7M, making it the most expensive city in San Diego County.
  • Spring Valley is the most affordable city in San Diego County, with a median listing home price of $725,000.

Home Prices in San Diego City, CA

  • San Diego City is an even more expensive housing market.
  • The median listing home price in San Diego City was $900K, trending up 12.6% year-over-year.
  • The median home sold price was $860K.
  • San Diego, CA is also a seller's market which means that more people are looking to buy than there are homes available.
  • Homes in San Diego, CA sold for approximately the asking price on average in August.
  • There are 102 neighborhoods in San Diego where Realtor.com has active listings.
  • East Village is the most affordable neighborhood in San Diego, with a median listing home price of more than half a million dollars ($595K).

Is it a good time to buy a house in San Diego?

Mortgage rates are rising compared to last year. In August 2022, the 30-Year Fixed-Rate was 5.22% while in August 2021, it was 2.84%. The supply is still low and with all of these factors considered, at this time, it is unlikely that the San Diego housing market will see any major price decline in 2022 or 2023. Here's how much buyers would need to pay for housing in San Diego County (source: CAR).

  • The median price of a one-bedroom house in San Diego County is $497K. If you put 20% down, the monthly payment = $2,758.
  • The median price of a two-bedroom house is $651K. If you put 20% down, the monthly payment = $3,615.
  • The median price of a three-bedroom house is $799K. If you put 20% down, the monthly payment = $4,438.
  • The median price of a four-bedroom house is $1.20M. If you put 20% down, the monthly payment = $6,665.

San Diego Housing Market

San Diego Housing Market Forecast 2022 and 2023

What are the San Diego real estate market predictions for 2022 to 2023? Let us look at the price trends recorded by Zillow (a real estate database company) over the past few years. The typical value of homes in San Diego County is currently $907,871. It indicates that 50 percent of all housing stock in the area is worth more than $907,871 and 50 percent is worth less (adjusting for seasonal fluctuations).

San Diego County's home values have gone up 13.4% over the past year. Since the last decade (September 2012), the typical home value in San Diego County has appreciated by nearly 149% — ZILLOW HOME VALUE INDEX. ZHVI represents the whole housing stock and not just the homes that list or sell in a given month.

The price of low-tier housing in San Diego County skyrocketed after the latter half of 2012. 2015 experienced another price increase, due to the boost given by decreased mortgage rates throughout 2015 and 2016. San Diego’s high home prices continued to find fuel from increased buyer purchasing power.

Although there has been a steady housing price growth from 2012 to 2018 the housing market did cool off from March 2018 till mid-2019. In 2018, home price growth sharply declined in reaction to slowing sales and rising interest rates, which began in late 2017. The chart clearly shows the flattening of the home price curve in that period. Home prices have since turned back up and the forecast is also positive.

San Diego Real Estate Appreciation Rates

San Diego is in the top 20% nationally for real estate appreciation. NeighborhoodScout.com's data also shows that in the past ten years, San Diego real estate appreciated by 115.52%. This amounts to an annual real estate appreciation of 7.98%. During the latest twelve months, San Diego's appreciation rate has been around 16.35%.

In the latest quarter, the appreciation rate has been 2.79%, which annualizes to a rate of 11.64%. Overall, there exists a limited supply of homes in San Diego, and buyers are forced to compete often resulting in higher prices and/or quicker sales that tend to benefit sellers.

San Diego County also comprises the San Diego-Chula Vista-Carlsbad, CA Metropolitan Statistical Area, which is the 17th most populous metropolitan statistical area. The San Diego-Carlsbad, CA Metropolitan Statistical Area is conterminous with San Diego County in Southern California. According to Zillow, the typical value of homes in San Diego-Carlsbad Metro is $907,871.

The forecast for 2022 & 2023 is that the shortage of supply and an increase in the demand for housing from millennials will push the prices higher in the next twelve months. The rate of appreciation will be much less than what we have seen in the last year when the mortgage rates were lower than 3%.

  • San Diego-Carlsbad Metro home values have gone up 13.4% over the past year and will continue to rise in the next twelve months.
  • Zillow predicts home price growth of 0.5% from Aug 2022 to Aug 2023.
  • San Diego County home values have gone up 13.4%.
  • San Diego City home values have gone up 14.5% to $968,370.
  • Carlsbad home values have gone up 20.7% to $1,451,790.

In a balanced real estate market, it would take about five to six months for the supply to dwindle to zero. In terms of months of supply, San Diego can become a buyer’s real estate market if the supply increases to more than five months of inventory. This housing market is skewed to sellers due to a persistent imbalance in supply and demand. This is also true across much of Southern California.

The chart below, created by Zillow, shows the growth of median home values since 2012.

San Diego Housing Market Forecast
Courtesy of Zillow.com

Greater San Diego Housing Market Report

In the Greater San Diego region, the decline in existing home sales coincides with rising home prices, which continued to gain last month, with the median sales price of single family homes up 7.1% compared to last year, according to the Greater San Diego Association of REALTORS®. The median sales price reached $$910,000 for detached homes in the Greater San Diego housing market.

The percentage change is shown year-over-year for July 2022.

  • The Median Sales Price was up 7.1 percent to $910,000 for Detached homes and 12.6 percent to $625,000 for Attached homes.
  • Closed Sales decreased 30.5 percent for Detached homes and 33.4 percent for Attached homes.
  • Pending Sales decreased 29.5 percent for Detached homes and 31.4 percent for Attached homes.
  • Inventory increased 20.1 percent for Detached homes and 22.3 percent for Attached homes.
  • Days on Market increased 40.0 percent for Detached homes and 33.3 percent for Attached homes.
  • Supply increased 41.7 percent for Detached homes and 55.6 percent for Attached homes.
Greater San Diego Housing Market Report
Source: Greater San Diego Association of REALTORS®

The San Diego real estate market has been ranked among the ten most expensive real estate markets in the country, though it ranks below several other West Coast cities. This creates massive demand for San Diego rental properties by those who simply cannot afford to buy homes. The rental market will continue to grow as the city grows an estimated 500,000 population by 2050, adding tens of thousands each year. The median rent in San Diego is $2700. The rent you’d receive on single-family San Diego rental properties would, of course, be much higher.

If you find a good bargain and make it family-friendly, you could charge well over $3000 a month. If you can convert San Diego rental properties into smaller units, you’d receive around $2200 a month for a one or two-bedroom apartment. The cash on cash returns for properties in the San Diego housing market is around 2.5% for traditional rental properties and nearly 2% if you rent on Airbnb. The fact that the city isn’t too dependent on tourism means you could rent properties on the beach to newcomers, locals, and students if tourism is slow.

Before the pandemic, the average rent for an apartment in San Diego had been growing at 4% year-over-year (source: RentCafe). About 40% of the apartments can be rented for less than $2000, and 60% of the apartments can be rented for more than $2,000 per month. This shows that rent prices are very high in San Diego.

Homeowners vs Renters Statistics: According to the most recent 2020 American Community Survey census data, San Diego County has a renter percentage of 46.7% which is the second most renter percentage of all the counties in the greater San Diego County region. The homeowner percentage is 53.3%. The monthly cost of ownership for property owners in San Deigo is around $2,073.

The median gross rent is $1,658, which is the third most expensive among all other counties in the greater San Diego County region. Comparing rental rates to the United States average of $1,062, San Diego County is 56.1% larger. Also, compared to the state of California ($1,503), San Diego County is 10.3% larger.

San Diego Rent Prices in 2022

As we write this, the average rent for a 1-bedroom apartment in San Diego, CA is $2,595. This is a 27% increase compared to the previous year. Over the past month, the average rent for a studio apartment in San Diego decreased by -2% to $2,151. The average rent for a 1-bedroom apartment decreased by -3% to $2,595, and the average rent for a 2-bedroom apartment decreased by -1% to $3,395.

  • Two-bedroom apartment rents average $3,395 which is a 24% increase from last year.
  • Three-bedroom apartment rents average $4,202 which is a 17% increase from last year.
  • Four-bedroom apartment rents average $4,673 which is a 4% increase from last year.

Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.

References

  • https://www.car.org/
  • https://www.car.org/marketdata/data/countysalesactivity
  • https://www.sdar.com/press-releases.html
  • https://www.zillow.com/SanDiego-ca/home-values
  • https://www.neighborhoodscout.com/ca/san-diego/real-estate
  • https://www.realtor.com/realestateandhomes-search/San-Diego_CA/overview
  • https://www.sandiegorealestatehunter.com/blog/san-diego-real-estate-market-forecast
  • http://www.homebuyinginstitute.com/news/san-diego-more-moderate-forecast
  • https://www.zillow.com/research/2020-hot-markets-south-26293/
  • https://journal.firsttuesday.us/san-diego-housing-indicators-2/29246/
  • https://www.rentcafe.com/average-rent-market-trends/us/ca/san-diego

Los Angeles Housing Market: Prices, Trends, Forecast 2022-2023

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Are Housing Prices Going Down in Los Angeles?

We'll discuss the recent trends in the Los Angeles housing market. The market dynamics are changing now. After a two-year housing boom spurred in large part by record low borrowing costs, the Los Angeles real estate market is now cooling down. There has been a decrease in house purchases and an increase in the number of homes for sale. Bidding wars have become less prevalent as a result of fewer buyers and more inventory, so buyers may have an easier time bidding around the asking price.

The median price in Los Angeles County peaked in September 2021 and has been on an up-and-down roller coaster since. It fell in July 2022, which was disappointing because it typically climbs from June to July; it even rose from June to July in 2009, when all hell had broken loose, putting this drop in a unique perspective. In August, the median home price took a small jump of 3% from the previous year and 1% from the previous month.

  • Los Angeles County's median price in August 2022 was $854,960
  • Los Angeles County's median price in July 2022 was $846,320
  • Los Angeles County's median price in August 2021 was $830,070

C.A.R.’s resale report for August shows that at the regional level, sales in all the major regions of California dipped from a year ago. Sales volume also collapsed in Los Angeles County by 29.1%, according to C.A.R.’s recent resale report. It shows that things are continuously becoming less hot as compared to the previous year.

The Los Angeles Metro Area posted a decline of -29.1% year-over-year in sales of existing single-family homes. The median home price in the Los Angeles metropolitan region was $765,000, 4.7% higher compared to August 2021, when it was $731,000. However, it was a decline of 1.9% from July's price of $780,000.

Generally, a balanced market will lie somewhere between four and six months of supply. Inventory is calculated monthly by taking a count of the number of active listings and pending sales on the last day of the month. If an inventory is rising, there is less pressure for home prices to increase. With 3.3 months of supply left, it is still short of what economists say is needed for a balanced market. Hence, the Los Angeles County housing market will continue to see upward pressure on home prices.

  • Months Supply of Inventory (SFH) for Los Angeles County is now 3.1 months.
  • Months Supply of Inventory (SFH) for the Los Angeles Metro Area is 3.1 months.

Los Angeles Real Estate Market Trends

Los Angeles County home prices are still higher than last year. There are around 218 cities in Los Angeles County where Realtor.com has active listings right now. We have already discussed the supply and demand imbalance in the county and metro area and how the monthly supply of inventory is down to about 13 weeks. Realtor.com's August 2022 statistics show that Los Angeles County is a seller's market, which means that more people are looking to buy than there are homes available.

They take into account two aspects of the housing market. The market demand is measured by unique viewers per property on their website, and the pace of the market is measured by the number of days a listing remains active on their website. In August, the median list price of homes in Los Angeles County was $850,000, trending up 6.3% year-over-year.

The median listing price per square foot was $569. The median price of sold homes was $820,000. The sale-to-List Price Ratio was 100%, which means that homes in Los Angeles sold for approximately the asking price on average. A seller would prefer this ratio to be 100% or more. On average, homes in Los Angeles sell after 55 days on the market.

If a region’s housing market is balanced it means that there is enough demand from buyers to equal the supply from sellers. Based on the supply-demand dynamics, the real estate appreciation rate in Los Angeles is predicted to remain slightly skewed on the sellers' side. The moderate demand but tight inventory should put upward pressure on the prices. Hence, the home values in the Los Angeles housing market will continue to appreciate over the next 12 months albeit at a smaller pace as compared to the past two years.

Some economists forecast that house prices would tumble in 2023, but few, if any, foresee declines comparable to the Great Recession. In large part, this is due to the fact that foreclosures were mostly responsible for the previous significant decreases. Now, financing criteria are much stricter, and experts say that unless they are forced to, many homeowners prefer not to sell for less than their neighbor did a few months ago.

Los Angeles Housing Market

C.A.R.’s August 2022 resale housing report shows that in Los Angeles County, homes are still moving fast. The median days on market is 16 days. But the sales of existing single-family homes are massively down 29 percent from the previous year. A brief reprieve in interest rates caused sales to climb 1.2% on a monthly basis, though.

If you’re looking to buy a house in LA’s real estate market, you may still end up paying slightly more than the asking price. The average sale price to list price ratio in LA was 99.9% in August. In August 2021, it was 103.7% and in July 2022, it was 100.2%. Higher mortgage rates in 2022 are leading to less number of buyers bidding up the prices of homes.

  • The single-family median price went up by 3% YoY to $854,960.
  • Last month the median home price was $846,320.
  • Last year at this time the median home price was $830,070.
  • Single-family sales were down 29.1% YTY but up 1% MTM.
  • The condo market also showed less buyer turnout.
  • Sales of existing condos were down 27.7% YTY but up 6.4% MTM.
  • The median condo price in Los Angele grew by 8.4% YTY to $598,450.
  • It was a decline of 1.9% from July's price of $610,000.
  • Last year at this time the median condo price in Los Angeles was $552,000.
Los Angeles Housing Market Report
Infographic Courtesy of CALIFORNIA ASSOCIATION OF REALTORS®

Are Home Rents Going Up or Down in Los Angeles?

The Zumper Los Angeles Metro Area Report analyzed active listings across 28 metro cities to show the most and least expensive cities and cities with the fastest growing rents. Rents in Los Angeles are higher than the state median rent. The California one bedroom median rent was $2,115 last month. Laguna Beach was the most expensive city with one-bedrooms priced at $3,140 while Hawthorne was the most affordable city with one bedrooms priced at $1,750.

The Fastest Growing Cities in the Los Angeles Metro Area For Rents (Y/Y%)

  • Redondo Beach had the fastest growing rent, up 35% since this time last year.
  • Pasadena saw rent climb 28.9%, making it the second fastest growing.
  • West Hollywood ranked as third with rent jumping 28.3%.

The Fastest Growing Cities in Los Angeles Metro Area For Rents (M/M%)

  • Laguna Beach had the largest monthly rental growth rate, up 6.1%.
  • Newport Beach increased 6% last month, making it second.
  • Burbank, Pasadena & Costa Mesa were tied for third with rents all climbing 5.9% last month.
Los Angeles Rental Market Trends
Credits: Zumper

Los Angeles Housing Market Forecast 2022 & 2023

The Los Angeles housing market forecast for 2022 & 2023 is positive. Home prices will rise but at a slower rate. Los Angeles has a track record of being one of the best long-term real estate investments due to high price appreciation. According to some analysts, home prices in Los Angeles are unlikely to drop, but the rate of increase will moderate.

In other words, prices will continue to rise, albeit at a slower rate than in the preceding two years. The analysts argue that despite the recent rise in supply and decrease in demand, there is still a severe housing shortage and a big number of individuals who can and want to purchase a home.

Let us look at the price growth recorded by Zillow, a leading real estate marketplace. Zillow Home Value Index is an adjusted measure of the typical home value and market changes across a given region and housing type. It reflects the typical value for homes in the 35th to 65th percentile range. ZHVI also represents the whole housing stock and not just the homes that list or sell in a given month. The typical home value of homes in Los Angeles County is currently $855,016.

It indicates that 50 percent of all housing stock in the area is worth more than $855,016 and 50 percent is worth less than it (adjusting for seasonal fluctuations). Using this methodology, Los Angeles County home values have appreciated by nearly 131% in the last decade (since August 2012).

Similar growth has been recorded by NeighborhoodScout.com as their data also shows that in the past ten years, Los Angeles real estate appreciated 136.22%. This amounts to an annual real estate appreciation of 8.98%, putting Los Angeles in the top 10% nationally for real estate appreciation.

During the latest twelve months, Los Angeles' property appreciation rate has been hovering around 14.27% and in the latest quarter, it has been 2.52%. If it remains steady, it would amount to an annualized rate of 10.46%. Tight supply and steady demand from home buyers have boosted home values across the Los Angeles metro area. Prices rose steadily over the past year, despite the economic slowdown brought on by the pandemic. A large number of millennials entered their 30s in 2020, a trend that will continue for several years.

Home prices are trending higher and are more attractive for sellers in the current phase. Higher mortgage rates will decrease home sales and the pace of home price appreciation. Zillow's forecast updated predicts that LA Metro home values will decline by 2.2% from Aug 2022 to Aug 2023.

  • Los Angeles-Long Beach-Anaheim Metro home values have gone up 10.9% to $914,636.
  • The Los Angeles metro housing market forecast ending with August 2033 is negative.
  • Zillow predicts that LA metro home values may decline by 2.2% by August 2023.
  • If this forecast is correct, Los Angeles home prices will be lower in the 2nd Quarter of 2023 than they were in the 2nd Quarter of 2022.
  • Los Angeles County home values have gone up 8.8% over the past year as of August 2022.

The chart below, created by Zillow, shows the growth of typical home values in these counties since 2012 and their growth.

Los Angeles Housing Market Forecast
Courtesy of Zillow.com

Is Los Angeles Housing Market Going to Crash?

Soem of housing analysts say that home prices in Los Angeles and Orange counties will fall by the middle single digits in 2023, while home prices in the Inland Empire would fall by the high single digits over the same time period. They anticipate that prices will continue to fall on a regional and national scale in 2024, but at a considerably slower rate, followed by a little increase in 2025. Compared to last year, the home sales in August 2022 were down in all six counties, with San Bernardino county recording the highest sales decline of 32.6% YTY.

Do buyers have any advantage? Is it the right time to buy a house in Los Angles? This is a never-ending question with no definitive answer. Buyers believe it is not a very good time to buy a home in Los Angeles due to rising mortgage rates and home prices. On the other hand, it is definitely a good time to sell so you can expect more inventory due to increasing seller optimism.

More houses are expected to be listed in the coming months which may bring down the pace of appreciation to some extent. Affordability is a big issue in Los Angeles County as nearly three in four residents can’t afford to buy a median-priced home in the area. According to HousingWire, an index that combined median income and median home prices made Los Angeles the least affordable city in the country, and several younger residents said they were concerned they will never be able to afford a house. Home shoppers are leaving Los Angeles for cheaper metros, the most popular being Las Vegas.

Is Real Estate a Good Investment in Los Angeles?

Should you consider Los Angeles real estate investment? Many real estate investors have asked themselves if buying a property in Los Angeles is a good investment. You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2022.

Los Angeles is a moderately walkable city in Los Angeles County. It is home to around four million people. It is the largest city in California and the second-largest in the United States. Los Angeles Metropolitan Area is a 5- region that includes Los Angeles, Orange, Riverside, San Bernardino, and Ventura. The L.A. metropolitan area with over 13 million people rivals New York in population as the largest in the country. However, being a huge real estate market is not reason enough to invest here.

The Los Angeles real estate market is considered one of the premier markets for both investors and homeowners. It is also touted as the nation’s least affordable housing market. If you look in the long-term, it’s always a good investment to buy in Los Angeles. It is said that you will always get your money back or you would make a profit, as Los Angeles has a track record of being a great long-term investment.

According to Neighborhoodscout.com, a real estate data provider, one and two-bedroom large apartment complexes are the most common housing units in Los Angeles. Other types of housing that are prevalent in Los Angeles include single-family detached homes, duplexes, rowhouses, and homes converted to apartments.

Single-family homes account for about 40% of Los Angeles' housing units. In April 2020, the single-family homes posted their biggest percentage gains of the year so far in the Los Angeles metro area. House prices increased by 4.9% in Los Angeles County, 3.7% in Orange County, and 5% in the Inland Empire.

The Los Angeles housing market has been hot for years. In 2018, the home prices in Los Angeles reached record heights, climbing to levels far above those recorded in the years leading up to the Great Recession. If we check historical data, in Los Angeles and Orange counties, year-over-year price increases peaked at 8.2% in April 2018 and have declined every month since. In October 2018, the home prices in Los Angeles and Orange counties rose 5.5% over the previous year, according to the latest available data from the closely watched S&P CoreLogic Case-Shiller index.

A big factor, according to experts, is that many would-be buyers are increasingly priced out. But real estate agents also say a growing number of people who could buy, like Saavedra, have decided they don’t want to pull the trigger at the top. Home values in Los Angeles are up less than 3 percent since last year. After years of steady escalation, home prices in Los Angeles County are tapering off, according to a new report from CoreLogic.

They find that Los Angeles county’s median home price was $579,500 in January, down slightly from December’s median price of $581,500. That’s a 2.6 percent increase over the same time last year. By this comparison, prices shot up nearly 8 percent between January 2017 and January 2018. Prices continued to rise through much of 2018 but began to drop heading into Q4 2018. In Q4 2019, home prices were still slightly higher than a year earlier, but the spread has narrowed.

2018’s FRM interest rate increase decreased the principal amount homebuyers can borrow while making the same sustainable mortgage payment. The National Association of Home Builders and Wells Fargo Housing Opportunity Index has given the title of least affordable housing market to Los Angeles. In Los Angeles-Long Beach-Glendale region, only 11.3% of homes sold during the fourth quarter of 2019 were affordable to families earning the area’s median income of $73,100.

The 2020 pandemic had its impact on the market bringing down the rent prices while houisng prices reached record highs. Los Angeles real estate market isn’t the most affordable in the country, but it’s a market with ample investment opportunities for those who can afford the median price of over 700K.

However, this number doesn't apply to every part of the Los Angeles real estate market. There are some neighborhoods where prices are much cheaper and completion between buyers is much lesser. The high rate of appreciation has not prevented real estate investors from realizing a great return on investment. Instead of flipping rehabs, you should consider investing in rental properties.

Let’s find some factors that make LA a good place to invest for wealthy investors. We’ll address the biggest factor pulling people to the Los Angeles housing market next. In this section, we're not taking into account the short-term impact of the pandemic on the economy and housing market.

Los Angeles Hidden Real Estate Deals

Distressed sellers exist in every real estate market. If you do find an ideal property in the Los Angeles housing market, the increased selection of properties means you’re far less likely to end up in a bidding war. If you’re looking for other great deals, check out Vermont Vista, Hyde Park, Wilmington, and Cypress Park, where the asking prices are below the Los Angeles median price. In December 2020, the median list price of homes in Vermont Vista was $580K while the median sale price was $566K.

Foreclosures can be a great way to snap up Los Angeles real estate at a bargain price. Foreclosure rates, though, vary wildly. Note that for every home in foreclosure with the bank, there is probably another that is approaching that point and would be sold at a discount by a distressed seller who wants to avoid foreclosure. In distressed neighborhoods, fix and flip may be an option. So is buying the Los Angeles real estate cheap and renting it out in a market starving for affordable rental units.

Single-Family Rental vs Multi-Family Investment

Years of appreciation have led the Los Angeles real estate investors to favor rentals over flipping. This market favors rental property owners. In the city of Los Angeles alone, renters live in more than 600,000 apartments spread across 118,000 properties, according to the city’s Housing and Community Investment Department. In late 2019, California became the second state (after Oregon) to pass a statewide rent control law. It covers all multi-family rental units built more than 15 years ago. The state law applies on top of any stricter local ordinances.

Therefore, rent control applies to Los Angeles rental properties if they are multi-family units. Single-family detached homes rarely fall under rent control ordinances. They are generally not subject to LA Rent Control. The only exception is when two or more dwelling units are located on the same lot; then rent control rules are likely to apply. The simplest solution to this is to only buy single-family Los Angeles rental properties. Never buy a property with a separately rented granny flat or upstairs apartment you could rent out, as well.

On the other hand, homeownership rates in California have been declining for years. The sea change has been the growth of renting among the middle and upper classes. For example, a third of Los Angeles residents with incomes over $100,000 rent instead of own. Baby Boomers downsizing their homes choose to rent condos and homes that others maintain. Millennials who have a good income often say their parents lose their homes in the Great Recession and choose to rent instead.

This is driving demand for the luxury Los Angeles real estate market, whether condos, apartments with concierges, or luxury homes rented instead of purchased so that the resident can easily move if they lose their jobs. Only San Jose and San Francisco have more high-income residents that rent than the Los Angeles real estate market. Although apartment prices are high and rising, they’re lower in Los Angeles than in California.

That’s one bright spot in an otherwise tough rental market for Los Angeles renters. The latest data from Zumper shows that the rents have been declining because of the pandemic. A one-bedroom apartment rents for around $1,940 (-14.2% YTY) and a two-bedroom apartment rents for $2,700 (-10.9% YTY). The average rent people pay is around $2400 a month.

The Military also adds renters to the Los Angeles housing market. Any military base will pump renters into a real estate market. The Los Angeles real estate market is simply notable for having a large military population but a job market so diverse that the closing of a base won’t hurt the area’s home prices overall.

The Los Angeles AirPort Base, Edwards Air Force Base, and smaller facilities dump many renters into the Los Angeles housing market. Those with families often choose to rent Los Angeles rental properties instead of life on base. On top of that are defense contractors like Raytheon in Long Beach and El Segundo who pay people a premium to live here.

Current Rent Prices in Los Angels: Before the pandemic, the average rent for an apartment in Los Angeles was $2,524, growing by 2% YTY, according to RENTCafé. The average size for a Los Angeles, CA apartment is 792 square feet. 40% of the households in LA are renter-occupied while 60% are owner-occupied. Studio apartments are the smallest and most affordable, 1-bedroom apartments are closer to the average, while 2-bedroom apartments and 3-bedroom apartments offer more generous square footage.

As of September 21, 2022, the average rent for a 1-bedroom apartment in Los Angeles, CA is currently $2,450. This is an 18% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Los Angeles increased by 3% to $1,745. The average rent for a 1-bedroom apartment increased by 1% to $2,470, and the average rent for a 2-bedroom apartment increased by 1% to $3,338.

  • The average rent for a 2-bedroom apartment in Los Angeles, CA is currently $3,338. This is a 15% increase compared to the previous year.
  • The average rent for a 3-bedroom apartment in Los Angeles, CA is currently $4,600. This is a 5% increase compared to the previous year.
  • The average rent for a 4-bedroom apartment in Los Angeles, CA is currently $7,100. This is a 3% increase compared to the previous year.

Some of the most affordable neighborhoods in LA are:

  • Jefferson Park, where the average rent goes for $1,355/month.
  • El Sereno, where renters pay $1,396/mo on average.
  • Vermont Knolls, where the average rent goes for $1,445/mo.
  • Glassell Park & Cypress Park, where the average rent goes for $1,485/month.
  • Cypress Park, where renters pay $1,396/mo on average.
  • North Hills, where renters pay $1,530/mo on average.

Construction Isn’t Meeting Housing Demand in LA

The Los Angeles housing market has seen a bump in residential construction. This has helped to satisfy some demand from renters. However, due to increasing demand, the new supply hasn’t brought prices down. The current supply of existing single-family homes is 1.4 which is insufficient to meet the demand. This also suggests that any new wave of construction will at most result in rental rates remaining steady instead of causing them to fall.

The geography of this region also limits the supply. The Los Angeles metropolitan area is perched between the ocean and the mountains. You obviously can’t build on water. There’s only so far you can build into the hills when mudslides and earthquakes limit how much you can build there. The Los Angeles real estate market is further constrained by the vast national parks around L.A. like the Angeles National Forest. These areas simply cannot be turned into residential areas.

Two of the most fundamental economic indicators are employment and income. Home sales usually are directly tied to an economy's health and rise and fall with economic activity. As economies slow, the supply of money tends to become more restrictive. What makes Los Angeles unique is the employment market. Want to work in Hollywood? Move to L.A. Want to work for a production company or in fashion? Come to L.A. If rent is too high, share an apartment or single-family home with friends. In terms of home prices, income, and employment indicate whether people can afford current and future increases.

The Golden State added 310,300 jobs in 2019, a 1.8% increase, to a total of 17.61 million, according to data released by the California Employment Development Department. The previous year’s increase was 1.6%. In Los Angeles County, nonfarm jobs grew by 67,800 to a total of 4.65 million. That was a 1.5% rise, led by healthcare and social assistance (up 28,000) and construction (up 8,500). The unemployment rate was 4.4% in December, down from 4.7% a year earlier.

Note that due to the ongoing pandemic, Los Angeles County’s unemployment rate has increased. It fell to 11% in November from a revised 12% in October amid seasonal hiring gains in retail and logistics, according to the State Employment Development Department. It was 19.6 percent in April 2020. Every major sector of the county’s economy suffered significant job losses during the past 12 months, led by accommodation/food services, which shed 120,000 payroll jobs.

How to Invest in Real Estate in Los Angeles?

In any property investment, cash flow is gold. California has the 6th largest economy in the entire world. This is largely driven by its innovative production, the heavy tech sectors in the state, and more. The Los Angeles real estate market has many points in its favor beyond its sheer size. The strong market fundamentals make the Los Angeles housing market a good place to invest if you’re looking at buying real estate in California.

How good is it to buy a Los Angeles investment property? Not every real estate investor wants to enter the most expensive and competitive Los Angeles real estate market. For buyers, the affordability is dropping and only 30% of LA county residents own a home. Home Prices are so high and out of reach for many buyers – many consider LA homes grossly over-priced.

While Los Angeles home prices may be increasing slightly over the next year, the fact remains that there are many homes available at fair prices. Growing household formations, ongoing job creation, and rising wage growth are fueling housing demand,” said NAHB Chief Economist Robert Dietz. “But a record-low resale inventory, coupled with underbuilding as builders deal with supply-side constraints, continue to put upward pressure on home prices even as interest rates remain at low levels.”

There’s still a strong opportunity for rental property investment in Los Angeles. There is a strong and continuous demand for apartments for rent in LA. This is fueled by always tight inventory, severe competition from tenants, rising wages, and a good economy. Therefore, for a great opportunity for rental income for investors. Good cash flow from Los Angeles investment properties means the investment is, needless to say, profitable.

A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding a good Los Angeles real estate investment opportunity would be key to your success. If you invest wisely in Los Angeles real estate, you could secure your future. The best investment is now looking for a rental property that will generate good cash flow. Your best tenants would be the retirees who intend to relocate to Los Angeles and want to purchase property to rent out.

The running costs for owning and managing a Los Angeles rental property should not be high. While hiring a property management company you should expect to give up roughly ten percent of the rent for each property they manage. Remember to factor this loss into your calculations when budgeting for a new rental property. The three most important factors when buying real estate anywhere are location, location, and location. The location creates desirability. Desirability brings demand.

There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your Los Angeles investment property and you should be able to get a good return on your investment over the long term. The neighborhoods in Los Angeles must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools, and shopping malls.

A cheaper neighborhood in Los Angeles might not be the best place to live in. A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio. Los Angeles real estate prices are well above average cost compared to national prices. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals such as duplexes and triplexes in Class A neighborhoods. The inventory is low, but opportunities are there.

Even as Los Angeles home prices have reached new heights, the market remains attractive to residential real estate investors. As they continue to compete for potential investment properties at the lower end of the market, the challenges for first-time homebuyers will remain. The homebuyers won’t be able to outbid real estate investors and would end up renting.

Home prices in Los Angeles are well below the national average for all cities and towns in the United States. According to Realtor.com, there are around 83 neighborhoods in Los Angeles. Bel Air has a median listing price of $4.7M, making it the most expensive neighborhood. Sunland-Tujunga is the most affordable neighborhood, with a median listing price of $695K.

Investing in more affordable neighborhoods (at least some of them) can give you a bigger return on investment in a shorter period of time. Here are some of the best neighborhoods in Los Angeles for buying investment properties.

El Sereno is a densely urban neighborhood (based on population density) located in Los Angeles, California. It is a predominantly Latino neighborhood northeast of Downtown Los Angeles. It is bordered on the north by Highland Park and South Pasadena, on the east by Alhambra, on the south by East Los Angeles, and on the west by Lincoln Heights and Montecito Heights. The average rental price in El Sereno is currently $1,921, based on NeighborhoodScout's exclusive analysis. Rents here are currently lower in price than 75.6% of California neighborhoods.

El Sereno real estate is primarily made up of small (studio to two bedrooms) to medium-sized (three or four bedrooms) single-family homes and small apartment buildings. Most of the residential real estate is occupied by a mixture of owners and renters. Demand for real estate in El Sereno is above average for the U.S. and may signal some demand for either price increases or new construction of residential products for this neighborhood.

What You’ll Pay in El Sereno: According to Realtor.com, in October 2021, the median list price of homes in El Sereno was $765,000 while the median sale price was $839,000. Homes in El Sereno sold for 3.26% above the asking price on average in October. On average, homes in El Sereno sell after 49 days on the market. The trend for median days on market in El Sereno has gone up since last month, and slightly up since last year.

Wilmington is a neighborhood in the Harbor region of Los Angeles, California. Wilmington shares borders with Carson to the north, Long Beach to the east, San Pedro to the south and west, and Harbor City to the northwest. The community of Wilmington is one of the oldest in Los Angeles. It is a modern and progressive community with a long and proud history of being the gateway to Los Angeles and the rest of Southern and Central California. There are historical museums, military installations, parks, and waterfront attractions to visit. Click on the image below to see some postcard images from the past.

What You’ll Pay in Wilmington: According to Realtor.com, in October 2021, the median list price of homes in Wilmington, CA was $600,000, trending up 13.7% year-over-year. The median listing price per square foot was $463. The median sale price was $625K. Homes in Wilmington, CA sold for approximately the asking price on average in October.

Highland Park is a neighborhood in Los Angeles. It is bordered on the south and east by the 110 freeway and stretches west almost all the way to Eagle Rock Boulevard. The neighborhood is in the midst of a renaissance, which has made it an affordable alternative for young professionals who find themselves priced out of central Los Angeles. It has been undergoing gentrification over the last 10 years and has seen an influx of trendy shops and restaurants, new parks, nightlife, and vibrancy.

What You’ll Pay in Highland Park: According to Realtor.com, in October 2021, the median list price of homes in Highland Park was $938,000, trending up 7.9% year-over-year. The median listing price per square foot was $711. The median sale price was $1.1M. Homes in Highland Park sold for 4.92% above the asking price on average in October.

West Hills is a residential and commercial neighborhood in the western San Fernando Valley region of the City of Los Angeles, California. The percentage of residents aged 35 and older is among the highest in Los Angeles County. Historic landmarks and many city parks are to be found within the community, as are commercial districts, a business district, and religious establishments. Niche.com ranks it #42 in Best Neighborhoods to Live in Los Angeles.

What You’ll Pay in West Hills: The median home value in West Hills is $936,065 and home values have gone up 22.8% over the past year. According to Zillow, it is a sizzling hot neighborhood based on three metrics: the list-to-sale price ratio, the prevalence of price cuts on home listings, and time-on-market. All these metrics show that buyer demand is very high in this neighborhood. Mashvisor also lists West Hills among the top three neighborhoods to purchase long-term Los Angeles investment property.

Mid City West is quite an appreciating neighborhood. For a prime city location, it's very safe, and in the residential areas, it's pretty quiet. This area is the true LA experience. It's diverse and much of it reaches into what people consider part of West Hollywood. Since 2012, the property prices have appreciated every year in this neighborhood. The current median home value in Mid City West is $1,913,156 and home values have gone up 5.6% over the past year.

What You’ll Pay in Mid City West: The good thing for new buyers is that the market has cooled off. The competition is less (as of now) so you can negotiate the deal down to the standard. Rental properties in Mid City West are in high demand right. The average rent for a 1-bedroom apartment in Mid City, Los Angeles, CA is currently $1,795. This is a 6% increase compared to the previous year.

Central City is an affordable neighborhood in LA for buying an investment property. Since 2012, the property prices have appreciated every year in this neighborhood. The median home value in Central City is $569,683. Central City home values have gone up 11.2% over the past year. The competition is less (as of now) so you can negotiate the deal down to the standard. The median listing home price in Central City East was $459.5K in October 2021, trending up 6.9% year-over-year. The median listing home price per square foot was $562.

If you think of investing in LA, you have decided on a long-term investment property. Here are the ten neighborhoods in LA having the highest real estate appreciation rates since 2000—List by Neigborhoodscout.com.

  1. W 21st St / S Orange Dr
  2. Irvington Pl / N Ave 51
  3. Montecito Heights Northeast
  4. N Ave 57 / Monte Vista St
  5. Happy Valley
  6. N Ave 52 / Granada St
  7. Highland Park
  8. Harvard Heights Southwest
  9. Highland Park North
  10. Apple St / S Dunsmuir Ave

As with any real estate purchase, act wisely. Evaluate the specifics of the Los Angeles housing market at the time you intend to purchase. Hiring a local property management company can help in finding tenants for your investment property in Los Angeles.

This article shouldn't be used to make real estate or financial decisions. Some of this article's information came from referenced websites. Norada Real Estate Investments provides no express or implied claims, warranties, or guarantees that the material is accurate, reliable, or current. All information should be validated using the below references. Norada Real Estate Investments does not predict the future US housing market. This article educated investors about LA real estate. Buying a rental property needs research, planning, and budgeting. Not all investments are good. Always do research and consult a real estate investment counselor.

REFERENCES

Market Data, Reports & Forecasts
https://www.car.org/marketdata/data/countysalesactivity
https://www.car.org/en/marketdata/interactive/housingmarketoverview
https://www.zillow.com/losangeles-ca/home-values
https://www.redfin.com/city/11203/CA/Los-Angeles/housing-market
https://www.realtor.com/realestateandhomes-search/Los-Angeles_CA/overview
https://www.zumper.com/rent-research/los-angeles-ca
https://www.zumper.com/blog/los-angeles-metro-report/
https://www.littlebighomes.com/real-estate-los-angeles.html

Covid-19 Impact/News
https://la.curbed.com/2020/2/28/21157988/home-prices-los-angeles-report
https://www.latimes.com/homeless-housing/story/2020-07-23/southern-california-home-prices

Best Neighborhoods and Statistics
https://www.zillow.com/
https://en.wikipedia.org/
https://www.neighborhoodscout.com/ca/los-angeles/real-estate/
https://www.mashvisor.com/blog/invest-los-angeles-real-estate-market-2019/

LA demographics
http://worldpopulationreview.com/us-cities/los-angeles-population

Rent control
https://www.latimes.com/archives/la-xpm-2007-dec-30-re-aptlife30-story.html

Foreclosures
https://www.realtytrac.com/statsandtrends/foreclosuretrends/ca/los-angeles-county

Rental market/Apartments
https://la.curbed.com/2019/2/4/18210857/los-angeles-rental-prices-2019-average
https://www.rentcafe.com/average-rent-market-trends/us/ca/los-angeles
https://la.curbed.com/2019/2/26/18241819/rent-vs-buy-los-angeles-high-income

Job & Unemployment Stats
https://fred.stlouisfed.org/series/CALOSA7URN
https://www.labormarketinfo.edd.ca.gov/file/month/la$pds.pdf

Military market
http://www.laalmanac.com/military/mi05.php
https://militarybases.com/california

Good time to buy/price predictions
https://la.curbed.com/2018/12/7/18128000/los-angeles-real-estate-market-prediction-2019
https://www.forbes.com/sites/ellenparis/2019/02/23/buyers-should-revisit-los-angeles-and-san-francisco-housing-markets-for-new-opportunities/#47bd1029428c

Richmond Housing Market: Prices, Trends, Forecast 2022-2023

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Richmond Housing Market Trends

Richmond metro is a hot housing market in Virginia. Forbes ranked Richmond #55 as the best place for business and careers in the U.S. Richmond's real estate market remains brisk, with buyers willing to pay more for homes than sellers are asking. Richmond homes are getting sold quickly and the metro area’s housing inventory has been squeezed significantly over the last two years.

There is a dearth of housing supply in the Richmond Metro. Over the last two years, available homes for sale have dropped by more than half. In August 2022, the Months Supply of Inventory for the Richmond Metro Area decreased by 10 percent for single-family homes, according to the Richmond Association of REALTORS®. It has dropped to a low of 0.9 months, which means that’s how long it would take to deplete the inventory to zero at the current sales pace.

<<<READ: Virginia Housing Market Forecast 2023>>>

For condos and townhomes, the inventory would also dwindle in just one month, if no new listings are put on the market. From January through August, 9,329 single-family homes were sold in the Richmond metro area, a 13.4 percent decrease over last year's busy market. August sales posted a decline of 20.7% over last year for single-family homes.

The new listings were down 29.6% and the total inventory dropped by 19.1% pushing the home prices up 10.1 percent to a median of $380,000. The difference between this August and last August's median home price is $35,000. Pending Sales (forward-looking indicator) decreased by 22.2 percent which shows that buyers are pulling back due to rising prices and high mortgage rates.

Richmond VA Real Estate Market
Housing data was collected by the Richmond Association of REALTORS® through Central Virginia Regional MLS.

The following real estate statistics are collected by the Richmond Association of REALTORS® for the time frame August 1 through August 31, 2022. It shows the percentage change of some of the key housing indicators of the Richmond Metro Housing Market (Chesterfield, Hanover, Henrico, and Richmond City), when compared to August 2021.

The direction and rate of change in home prices are indicators of the housing market's health and whether homes are becoming more or less affordable. Looking at these trends, it's a seller's market in the Richmond Metro Area. Strong buyer demand is likely to continue into what is typically the slowest time of year. With inventory remaining constrained in most market segments, sellers continue to benefit from tight market conditions. However, higher mortgage rates are impacting home sales and moderating home price gains.

  • New Listings decreased 29.6 percent for Single Family homes and 13.7 percent for Condo/Town homes.
  • Pending Sales decreased 22.2 percent for Single Family homes and 12.2 percent for Condo/Town homes.
  • Inventory decreased 19.1 percent for Single Family homes and 27.2 percent for Condo/Town homes.
  • Median Sales Price increased 10.1 percent to $380,000 for Single Family homes and 14.2 percent to $317,500 for Condo/Town homes.
  • Average Sales Price increased 12 percent to $436,056 for Single Family homes and 10.9 percent to $329,972 for Condo/Town homes.
  • Days on Market increased 8.3 percent for Single Family homes and 15 percent for Condo/Town homes.
  • Months Supply of Inventory decreased 10 percent for Single Family homes and 23.1 percent for Condo/Town homes.

Richmond VA Real Estate Market Forecast 2022 & 2023

What are the Richmond real estate market predictions for 2022 and 2023? Virginia Beach is the biggest city in the state. It is followed by Norfolk on the shores of the Chesapeake. These large, dense housing markets attract attention, but it is Richmond, Virginia you should be thinking of. Yet few do beyond memorizing their state capitals. Richmond is home to roughly a quarter-million people.

The Richmond VA real estate market is several times larger than this. If you include the suburbs around it, the Richmond housing market contains nearly one and a half million people. This makes the Richmond area the third-largest metropolitan area in the state of Virginia. Richmond has a mixture of owner-occupied and renter-occupied housing. Single-family detached homes are the single most common housing type in Richmond, accounting for 48.72% of the city's housing units.

Other types of housing that are prevalent in Richmond include large apartment complexes, duplexes, and a few row houses. According to Zillow, a leading real estate marketplace, the typical value of homes in the Richmond metro is $337,047. Richmond metro home values have gone up 13.2% over the last twelve months.

According to NeighborhoodScout's data, appreciation rates for homes in Richmond have been tracking above average for the last ten years. The cumulative appreciation rate over the ten years has been 88.39%, which equates to an annual average appreciation rate of 6.54%. During the latest twelve months, Richmond's appreciation rate has been 14.67%, and in the latest quarter, it's been 1.78%, which annualizes to a rate of 7.29%.

Here is a short and crisp housing market forecast for Richmond City, Chesterfield, Hanover, and Henrico Counties — all of which are part of the Richmond Metro Area Housing Market. Housing inventory remains scarce. The supply and demand dynamics will likely push prices north again over the next 12 months.

  • Richmond Metro home values have gone up 13.2% over the past year.
  • Zillow predicts that Richmond Metro home values will rise by 0.8% between Aug 2022 to Aug 2023.
  • Richmond City home values have gone up 14.1% over the past year.
  • Chesterfield County home values have gone up 14.5% over the past year.
  • Hanover County home values have gone up 9.6% over the past year.
  • Henrico County home values have gone up 12.2% over the past year.
Richmond Real Estate Market Forecast
Courtesy of Zillow.com

Richmond Real Estate Investment Overview

Many real estate investors have asked themselves if buying a property in Richmond is a good investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the Richmond housing market forecast for answers on why to put resources into this market. Although, this article alone is not a comprehensive source to make a final investment decision for Richmond we have collected some data for those who are keen to invest in Richmond real estate in 2023.

Being the capital of Virginia is not reason enough to make a real estate investment. However, being a capital city results makes it a good housing market to invest in. For example, government employment for better or for worse is relatively high in state capitals. That creates a large number of good-paying jobs, raising property values.

You see the same thing on a grander scale in the wealthy suburbs around Washington, D.C. Being the state capital and the central transportation hub for the region resulted in it being a center of commerce and trade. This led to many law firms and banks having their headquarters here. That is aside from the hospitals and educational institutions in the area. This contributed to the average salary hovering around 50,000 dollars a year. In 2017, Richmond made multiple lists of the best places to retire in the United States as well as top places to live.

Points in favor of the Richmond VA real estate market included its intellectual and creative life, affordability, and quality of healthcare. This has led to a spate of new construction for active adult communities. Investing in Richmond real estate will fetch you good returns in the long term as the home prices in Richmond have been trending up year-over-year. Let’s take a look at the number of positive things going on in the Richmond real estate market which can help investors who are keen to buy an investment property in this city.

Richmond's Large Student Market For Rentals

The Richmond VA real estate market is perfect for those who want to cater to the student market. It is incredibly diverse. The Virginia Commonwealth University campus is home to roughly 30,000 students. That’s aside from the University of Richmond satellite campus. Virginia Union University hosts nearly two thousand college students.

Small private schools like Virginia College and Fortis College host just a few hundred students. There are Baptist, Presbyterian, and several other seminaries in the city, as well. You could find a Richmond real estate investment property near any of these campuses (or in easy reach of several) and rent it out to a steady stream of students.

The main reason you would buy a Richmond real estate investment property is for the rental income. However, the more important factor is the return on the investment. In this regard, the Richmond housing market shines. The median rental rate is roughly 1300 dollars a month for an apartment.

Rental rates are increasing year-over-year due to demand. This will result in continued increases in rents for the foreseeable future. If the economy were to decline (due to unforeseen things like this pandemic), the fact that there are so many students in the area will bolster rental rates in the Richmond real estate market.

Current Rental Market Trends: Before the pandemic, the average rent for an apartment in Richmond was growing at 6% annually (source: RENTCafe). The average size for a Richmond, VA apartment is 862 square feet, but this number varies greatly depending on unit type. Studio apartments are the smallest and most affordable. Around 55% of the households in Richmond, VA are renter-occupied while 44% are owner-occupied.

As of September 19, 2022, the average rent for an apartment in Richmond, VA is $1,366 which is a 28% increase from last year. Over the past month, the average rent for a studio apartment in Richmond increased by 2% to $1,365. The average rent for a 1-bedroom apartment increased by 1% to $1,366, and the average rent for a 2-bedroom apartment increased by 3% to $1,575.

  • Two-bedroom apartment rents average $1,575 (a 19% increase from last year).
  • Three-bedroom apartment rents average $1,899 (an 8% increase from last year).
  • Four-bedroom apartment rents average $2,100 (a 2% increase from last year).

Top Neighborhoods include Jackson Ward, Westover Hills, Manchester, The North Side, Three Corners, and Oregon Hill.

The Tourist Market Boosts Short-Term Rentals

Yes, Richmond, Virginia has a tourist market. More than seven million people a year pass through. They may be visiting one of the oldest cities in the United States to tour the Revolutionary era or Civil War sights. Others attend weddings and graduations in the area. The city is considering becoming more friendly to short-term rentals, something that has been illegal.

Short-term rentals have been illegal under local law, but under the new ordinance, property owners can list with sites like Airbnb if they pay an annual $300 permitting fee. That fee would go toward a 3rd-party monitoring program. The city is also requiring short-term rental operators to live in the home for 185 days each year.

Certificate of Zoning Compliance (CZC) for Short-term Rental (Short-Term Rental Permit) is to be obtained on a biennial basis.  The ordinance to permit short-term rentals was adopted by City Council on June 22, 2020. The effective date of the ordinance is July 1, 2020.

The Relative Landlord-Friendly Regulations

The Richmond housing market is quite landlord-friendly. There is no limit on late fees as long as they are written into the lease. Written leases aren’t required unless for more than 12 months. There is no notice of entry law in the state. The only area where Virginia falls short is the long, complex eviction process. The average Richmond real estate investment property owner offsets this by having a large security deposit and thorough background checks. Security deposits are typically limited to two months’ rent. You can charge an application deposit on top of the security deposit.

Growing Economy

Unemployment in the Richmond area hovers around three percent, half a point or so below the national average. More importantly, the area has seen better than average job growth over the past few years. In 2017, they were among the top 25 metro areas with the fastest job growth. Future job growth is expected to be 35 percent over the next ten years, several percentage points higher than the national average.

This will contribute to steady population growth as college graduates find jobs in the area and end up raising their families here. Virginia’s economy has benefitted in recent years from increased federal government spending as well as improvements in its business climate. CNBC named Virginia the top state for doing business in 2019, a point driven home by Amazon’s selection of Northern Virginia for its HQ2 in November 2018.

Richmond’s ties to Northern Virginia are strengthening, helping Virginia’s capital city attract a wide range of new business development. Growth along the coast has been more modest but rising defense spending is finally providing a boost to the Norfolk area. Charlottesville and Harrisonburg are also hot spots.

Richmond has crafted a 1.5 billion dollar redevelopment plan for the area around Richmond Coliseum. Large sections of downtown will be renovated and redeveloped to include new condos, retail and commercial space. It will be home to a new transit building, arena, and mixed-use developments. This will increase the value of all properties in the Richmond housing market in and around downtown.

Conclusion

The Richmond Metro Area is historic, but it is already a modern city embracing smart growth and development. It is a stable housing market that offers good returns without massive regulation or heavy taxes.

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Richmond.

Consult with one of the investment counselors who can help build you a custom portfolio of Richmond turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best neighborhoods of Richmond

Not just limited to Richmond or Virginia but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Richmond turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.

Some of this article's information came from referenced websites. Norada Real Estate Investments provides no express or implied claims, warranties, or guarantees that the material is accurate, reliable, or current. All information should be validated using the below references. Norada Real Estate Investments does not predict the future US housing market. This article educated investors on Richmond real estate. Buying a rental property needs research, planning, and budgeting. Not all investments are good. Always do research and consult a real estate investment counselor.

References

Market Data, Reports & Forecasts
https://rarealtors.com/housingreports/
https://www.zillow.com/Richmond-va/home-values
https://www.redfin.com/city/17149/VA/Richmond/housing-market
https://www.redfin.com/state/Virginia/housing-market
https://www.neighborhoodscout.com/va/richmond/real-estate
https://www.realtor.com/realestateandhomes-search/Richmond_VA/overview/

Student Market & Rental Trends
https://en.wikipedia.org/wiki/Richmond,_Virginia#Demographics
https://www.collegesimply.com/colleges-near/virginia/richmond
https://www.rentjungle.com/average-rent-in-richmond-va-rent-trends
https://www.rentcafe.com/average-rent-market-trends/us/va/richmond/

Landlord friendly
https://www.avvo.com/legal-answers/va-landlord-tenant-law-question-377594.html
https://www.avail.co/education/laws/virginia-landlord-tenant-law

Economy
https://wtvr.com/2017/08/25/the-25-metro-areas-with-the-fastest-job-growth
https://www.bestplaces.net/economy/city/virginia/richmond
https://www08.wellsfargomedia.com/assets/pdf/commercial/insights/economics/regional-reports/va-economic-outlook-20200310.pdf

Redevelopment
https://www.richmond.com/news/local/city-of-richmond/update-stoney-to-introduce-now–billion-richmond-coliseum-redevelopment/article_3c6d3b83-8c21-5f19-ab73-995b2f57e6a5.html
https://www.wric.com/news/local-news/richmond/how-richmond-plans-to-pay-for-the-navy-hill-redevelopment-project

Real Estate Notes Investing: Should You Buy Notes in 2022?

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Mortgage note investing is one of the most profitable real estate investment strategies accessible, yet it receives little attention. We will explore the many forms of mortgage notes and how to invest in them in this article. Mortgage note investing is the process of owning real estate without managing it or becoming a landlord, in which the homeowner pays the investor rather than the bank. It is a low-cost method of investing in real estate.

Note investing can be an incredible vehicle for building passive income but there are many things that you should be aware of. Mortgage notes are also known as real estate lien notes and borrower’s notes and they have become a popular asset class over the past few years. Investing in mortgage notes has many benefits such as — rates of return that are higher than the bank's traditional low-yield bonds; and higher than most stock dividends.

Notes are available through note exchanges, note brokers, and organizations. Both performing and non-performing notes are almost always sold at a discounted price, although non-performing notes will likely sell for steeper discounts, and real estate investors can realize significant profits. Consider using a mortgage broker or an investment advisor to help you find the best options. If you are experienced enough, you can potentially find and purchase your mortgage notes. 

What is a Mortgage Note?

real estate mortgage note investing

A real estate mortgage note is a promissory note secured by a mortgage loan. It’s a way of saying promissory notes secured by a piece of property. That security instrument can be either a mortgage or a Deed of Trust. It depends on what state you’re doing business in or which security instrument you’re using.

So, you’ve got a note, which is the promise to pay, or a promissory note. Then that is piggybacked with another document which is the security instrument, and that’s either a mortgage or a Deed of Trust depending on what state you’re in. It’s a two-part instrument and they move together.

The promise to pay is called a promissory note, which states how big the loan is, the interest rate, and the terms of the loan. That security instrument which is the mortgage note or the Deed of Trust, that’s the thing that ties that note to the piece of property, and what makes that promise to pay have much strength.

It’s either the borrower pays you as agreed or you get to foreclose on that property, and ideally foreclose on that property for pennies on the dollar. The difference between a mortgage and a Deed of Trust is that a Deed of Trust is what’s called a non-judicial foreclosure action. If someone doesn’t pay you, then you file a notice in the public record that it’s such and such a date.

On the courthouse steps, this property will be auctioned for sale. That’s it. As long as you comply with the timing and the noticing, then that sale goes through. A mortgage is different from a Deed of Trust in that you have to go to court to get the court to foreclose on the property for you. As an example, when you take out a home loan, the lender will probably require you to sign both a promissory note and a mortgage.

Suppose you want to buy a property worth $150,000 but you don't have enough cash. In this case, you can apply for a loan whereby you can pay part of the purchase price as a down payment and borrow the remaining amount from a lender. Normally, you need to pay 20% as a down payment.

Therefore, the loan amount would be $120,000. In exchange for $120,000, the lender would make you sign a promissory note and a mortgage. Here a promissory note is being signed by you as a borrower, and it is a promise to repay the debt incurred by you in the purchase of your property.

The note will state who borrowed money from whom, the loan amount, the interest rate, the tenure of repayment, and what happens in the event of a default. A mortgage is a separate document that collateralizes the lender and is secured by the property. It is a contract that hypothecates a lien on the property, or the mortgage deed may be updated to specifically give the lender foreclosure property if contractual terms aren’t met. It will say who is personally responsible for the debt, whether it is an individual, a couple, or a corporation.

The Contract For Deed vs Mortgage

A contract for deed is an agreement to buy a home from a seller, while the seller keeps ownership of the home. It is not the same as a mortgage loan. The buyer agrees to pay the seller monthly payments, and the deed is turned over to the buyer when all payments have been made. Buyers make their payments directly to the seller for a certain number of years and then a balloon payment (or remaining balance) is due.

One major difference is you do not have the same protection rights, since the seller retains ownership. The seller determines the
interest rate and how much of your payment is used to pay the principal (or balance). Generally, you pay the seller directly for property taxes and insurance. Unlike a traditional mortgage, a defaulting buyer in contact for deed may only have 30-60 days to cure the default or move out.

With a mortgage note secured by the mortgage deed, sellers don’t have to go through foreclosure proceedings to seize the property. A seller can terminate the contract right away without going through all of the legal procedures required for a mortgage holder to foreclose on a home.

If the seller cancels the contract you have 60 days to resolve the reason. If the contract is not reinstated, you are required to leave the home. You also lose any money you have paid the seller.

Different Types of Real Estate Mortgage Notes

There are both commercial and residential mortgage notes, and both are open to investors. They’re both promissory notes secured by a certain property. All mortgage notes should specify the roles and responsibilities of all parties and what qualifies as a breach of the agreement. One of the major differences between real estate mortgage notes is the loan terms.

Fixed-Rate Mortgage Loans

A fixed-rate mortgage or FRM is a loan that has a fixed interest rate and set payments. This is the most common type of mortgage offered by banks, but it can be offered by private individuals. The greatest benefit of this loan is that the borrower has the same payment every month.

The Graduated Payment Mortgage

The graduated payment mortgage or GPM has a fixed interest rate with adjusting payments. It typically has a low initial monthly payment that increases over time. These loans are sometimes used for student loans, but they can be found in real estate, too. This is a type of negative amortization loan. There is a risk that the person who purchased the home will be unable to make the later, higher payments.

An Adjustable Rate Mortgage

An adjustable-rate mortgage or ARM has an interest rate tied to some third-party indices. Banks will tie the interest rate on the adjustable rate to the interest rate offered by the Federal Reserve, and the interest rate on the mortgage will rise and fall with it. This is why they’re sometimes called variable-rate mortgages. For consumers, the ARM may result in lower payments when interest rates are low.

However, it brings the risk that they can’t afford their house payment when interest rates rise. Lenders are protected from losses if interest rates rise. Private lenders have to deal with more complicated loan administration. Buyers have the option of sending in the same monthly payment, but the amount of principle applied to the loan with each payment varies.

A Balloon Payment Mortgage

A balloon payment mortgage is generally a fixed-rate mortgage with a large payment due at the end. This is in contrast with traditional mortgages where the final payment pays off the debt entirely. Balloon payments may be accepted by a borrower who can’t manage the monthly payments without them.

They may hope to qualify for a conventional home loan at the end of the private mortgage to get the money to pay off the balloon payment. The occupant runs the risk of losing the home if they can’t make the balloon payment. This is separate from the mortgage acceleration clause that makes the entire amount due after a payment is missed.

The Interest-Only Loan

An interest-only loan is a mortgage where the person only pays interest on the loan. Some people take out an interest-only loan because they can’t afford to pay on the principle. This borrower demographic is very high risk. Yet interest-only loans are attractive because of the low monthly payments. This is a popular loan for property developers. You get the money to buy the property. You expect to sell it for a profit and pay off the mortgage note.

Interest-only loans were commonly used in hot real estate markets before the Great Recession, but they’ve almost disappeared from the residential real estate market because people aren’t making progress on the loan balance. This left many people underwater, owning more than their home was worth.

In these cases, people are expected to be able to refinance the interest rate mortgage into a fixed-rate mortgage once the home’s value has appreciated. The interest-only mortgage had the benefit of allowing them to get into a home now before prices went up further. These loans often became negative amortization loans, because financially stressed people missed payments and saw the total loan balance increase.

Minimum payments that didn’t even cover the full interest payment led to an accrued interest to compound, as well. We consider interest-only loans to be a high risk unless you’re dealing with a real estate developer. Interest-only hard money loans would fall into this category. You can issue an interest-only loan with a recast period, where you force them to refinance the loan or pay off your loan with a third-party mortgage after a set period of time.

Real Estate Mortgage Note Investing

Mortgage notes can be a good real estate investment for people seeking passive income. When you buy a mortgage note, you receive monthly payments that include both interest and principle. It is a steady stream of income like you’d receive from a rental property, but there is no need to maintain the property like a landlord.

It is far easier to invest in real estate located around the country because you don’t have to deal with local rules regarding real estate licensing or taxes. The mortgage note spells out the loan duration. You know how long you’ll receive loan payments, and it may be 10 to 30 years. You may be able to increase the value of the mortgage note by buying from a distressed note holder. For example, you may find a farm or family property sold via owner financing.

The person sold their home, but now they have to manage the loan. They may require the money, whether it is to allow them to buy a new home or simply get cash to fund their retirement. In these cases, you might offer 80,000 dollars to buy a 100,000-dollar note. If they accept, you receive the interest and principal on a 100,000-dollar loan but only paid 20,000 dollars for it.

Another class of desperate sellers is the private lender with a slow or non-paying borrower. They’re not getting the income they expected. They may be reluctant to foreclose on a slow-paying family member. Or they may not want the property back.

You can buy these notes for far less than their face value. However, you’re going to either need to ramp up collection efforts or foreclose on the property. Only buy notes like this if you have a plan for how to monetize the property, whether you rent it out, sell it to someone else or redevelop the property.

Advantages of Buying a Real Estate Mortgage Note

  • High Yield Returns – Rates of return that are higher than the bank's traditional low yield bonds; and higher than most stock dividends.
  • Monthly Income – If you are looking for additional monthly income for retirement, for living expenses, or to build your savings account, we can help.
  • IRA Friendly – This investment provides investors with a way to put to use their self-directed traditional IRA or Roth IRA.  We can recommend several custodian companies that handle the paperwork and hold your IRA while the funds are invested with us.
  • Rollover Option – Option to automatically roll over your investment so you don’t miss out on earning interest or future investment opportunities.

How To Buy To Real Estate Mortgage Notes?

It is hard to find the farmer who sold their property to an up-and-coming farmer or family member who wants to sell the note so they have the money they need to pay for long-term care. This is why many investors go through brokers to find mortgage notes for sale. These brokers specialize in locating both private and public deals.

There are even online marketplaces like NotesDirect to help you find, vet, and buy notes. You can try to find deals through real estate investor groups. In this case, you’re buying notes from people who trade future income for liquid funds. Mortgage notes are often associated with owner financing.

You might find mortgage notes for sale by going through for-sale-by-owner groups and making offers to former property owners who are desperate for cash. Furthermore, mortgage notes may be sold by real estate investor groups or real estate investment trusts.

In the latter case, you could even buy a mortgage for a multi-family apartment building. If you are buying a nonperforming mortgage, investing in real estate notes is one of the cheapest ways to acquire such properties.

how to invest in mortgage notes

Buying a Non-Performing Note vs Performing Mortgage Note

A non-performing note is a note where the borrower is not paying as agreed. The borrower who is behind on their loan payments or regularly made late payments is the reason why you have non-performing notes. Performing notes are those where the payments are made on time and in full. Performing notes sell for 75 to 100 percent of their current value. Sub-performing notes can be found for 50 to 80 percent of their current value.

That lower price tag is what attracts some investors. They’re also priced to factor in the risk of someone who hasn’t paid their mortgage in the past 15 to 60 days or has had missed payments in the past.

Non-performing notes are notes that are already in default. They are attractive to investors because you might buy the property for 10 to 30 percent of its actual value. It can be a cheap way to buy a real estate investment property. It does come with the hassle of renegotiating the deal (rarely done) or foreclosing on the property.

If you’re considering buying a mortgage note for a multifamily property, you cannot consider the property without doing detailed research. It doesn’t matter if they have almost every unit full if only half the tenants are paying their rent. What is the property’s condition? You don’t want to buy a multi-family property that is falling apart.

The Risks of Investing in Mortgage Notes

These notes are not FDIC insured. Instead, it is secured by a property whose condition may not be great. And you’re not responsible for its upkeep. Yet you want to verify the condition of the property before you buy it, or else you’re paying less than the property is worth. You run the risk of having to pay money to get what you’re owed.

You will have to pay various legal fees to foreclose on the property. You may have to sue to get back mortgage payments, too. Know the foreclosure laws for the area where the property is located, especially if you’re considering buying a non-performing loan. Non-performing assets also depreciate because while your expenses continue the property is most likely not be well kept. Even if there is some appreciation in the property value, it is usually offset by the expenses you are spending. They have a high risk of default which is bad for your cash flow.

The mortgage note investing industry is not very regulated as of now. Before entering the mortgage note investing space know the fact that this is a risky business. You can buy a mortgage note without the permission of the person who lives in the property. When you buy a note and mortgage from the lender, you're buying the debt that remains to be paid on the note, secured by the asset outlined in the mortgage.

You're not buying the property. Sometimes, you do run the risk of property owners initially refusing to pay you because they don’t think they owe you the money. The solution to this is good communication, including the initial note holder informing them that the loan is being transferred.

Do your research. Don’t buy a multi-family property note before you know the percentage of the units that are occupied by rent-paying tenants. Know if you have a say in the property manager in charge of the property because putting a good one in could increase occupancy rates, payment rates, or even the average monthly rent.

Know how to get a copy of the original note along with all amendments and assignments. You don’t want to buy a mortgage note and get sued by someone else who had the title. You may want to pay a title search company to do such a search before you buy the note, though this is an expense you have to pay out of pocket even if you don’t buy it. Know your lien position, so that the house isn’t sold to pay a different creditor while you get less than you’re owed.

Summary

Real estate mortgage notes may allow you to get a regular stream of income without the hassles of a landlord, or you can buy the note and sell it later to another investor. Or it can be a way to secure properties for less than their market value. But real estate mortgage notes are a good way to invest in real estate with relatively little work beyond the initial search and purchase.

Also Read: Mortgage Interest Rates Forecast 2022 & 2023

References

  • https://en.wikipedia.org/wiki/Mortgage_note
  • http://www.differencebetween.net/business/finance-business-2/difference-between-mortgage-and-note
  • https://www.fool.com/millionacres/real-estate-investing/articles/complete-guide-investing-real-estate-mortgage-notes/#
  • https://www.realtor.com/advice/finance/what-is-a-mortgage-note/
  • https://www.multihousingnews.com/post/6-things-to-consider-before-purchasing-non-performing-notes
    https://money.usnews.com/investing/real-estate-investments/articles/why-buying-mortgage-notes-are-good-real-estate-investments
  • https://www.multihousingnews.com/post/6-things-to-consider-before-purchasing-non-performing-notes
    https://www.biggerpockets.com/blog/2011-02-09-differences-performing-and-non-performing-notes
  • https://noteinvestor.com/how-to-buy-mortgage-notes

Minneapolis Real Estate Market: Prices, Trends, Forecast 2022-2023

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This article has been updated to reflect recent changes in the Minneapolis real estate market due to the coronavirus pandemic. We'll be discussing the housing market trends for the Twin Cities Metro Area in 2022. Our focus for real estate investment would be the Minneapolis housing market—the entire twin city metro area—and we shall also share the top reasons to invest in this region.

Minneapolis–Saint Paul is a major metropolitan area and is commonly known as the Twin Cities after its two largest cities—Minneapolis and Saint Paul. They’re separated by the Mississippi River. The waterfront is home to many cultural landmarks and coveted waterfront real estate. The Twin Cities housing market remains strong, with the median price reaching $375,000 in July 2022, a 7.1 percent increase from last year, according to new data from the Minneapolis Area REALTORS® and the Saint Paul Area Association of REALTORS®.

<<<READ: Minnesota Housing Market: Prices & Forecast>>>

The ongoing inventory shortage is primarily to blame, though the housing inventory in July increased by 13.3 as compared to last year. The housing supply is now 1.7 months, which is still a sign of a strong seller's market. Given a chronically undersupplied market with strong demand, home prices are expected to rise further, albeit at a slower pace due to rising mortgage rates.

Buyers spend approximately $205 per square foot on average. The Twin Cities currently has less than seven weeks' worth of inventory, whereas a balanced market has four to six months' worth. However, over a decade of underbuilding has resulted in fierce competition for the majority of listings.

Despite lower inventory levels, there are signs that supply is beginning to stabilize as the inventory of homes for sale is up 13.9% from last July. Sellers sold 20.2 percent fewer homes than in July of last year. The declines are due in part to the exceptional strength of the 2021 market and also a reaction to rising mortgage rates.

Minneapolis–Saint Paul Housing Market Trends (Describes Twin Cities)

Here are the most recent housing statistics in Minneapolis–St. Paul–Bloomington MN-WI metropolitan area. The area is commonly known as the Twin Cities after its two largest cities, Minneapolis, the most populous city in the state, and its neighbor to the east, Saint Paul, the state capital. With a strong economy and low mortgage rates, buyer activity was very strong last year. Supply and demand continued to favor sellers leading to a rise in prices.

In the 16-County metro area surrounding the Twin Cities, where the housing market has been particularly hot, the number of closed sales fell 20.2 percent to 5,442 in July 2022 as compared to last year. The source of this report is the Minneapolis Area REALTORS® and the Saint Paul Area Association of REALTORS®.

  • In July 2022, the number of new listings in the Twin Cities decreased by 17 percent to 6,845.
  • The number of days on the market increased by 15.8% to 22 days.
  • Price Per Square Foot increased 5.8% to $205.
  • The median sales price increased 7.1% to $375,000.
  • The average sales price increased 7.4% to $434,254.
  • Months Supply of Inventory increased by 13.3% to 1.7 months.

Minneapolis Housing Market Trends (Describes City's Housing Stats)

The median list price of homes in Minneapolis, MN was $325K in August 2022, trending up 4.9% year-over-year, according to Realtor.com The median sale price was $340K. The Sale-to-List Price Ratio is 100%, which means that on average, homes in Minneapolis, MN sold for approximately the asking price in August. Minneapolis is a seller's market, which means the total sales-to-total listings ratio is above 0.2. It also means that more people are looking to buy than there are homes available.

Below is the latest report of the Minneapolis Housing Market which compares the Minneapolis housing metrics from July 2022 with July 2021.

  • In July 2022, the number of new listings in Minneapolis decreased by 22.1 percent.
  • The number of days on the market increased by 11.1% to 30 days.
  • Price Per Square Foot increased 0.3% to $239.
  • The median sales price increased 2.6% to $330,000.
  • The average sales price increased 3.2% to $396,617.
  • Months Supply of Inventory decreased by 4.8% to 2.0 months.

Saint Paul Housing Market Trends (Describes City's Housing Stats)

According to Redfin, a real estate company, the St. Paul housing market is very competitive. Many homes get multiple offers, some with waived contingencies. The average homes sell for about 2% above the list price and go pending in around 14 days. Hot listings on the market can sell for about 7% above the list price and go pending in around 7 days.

In July 2022, St. Paul home prices were up 7.4% compared to last year, selling for a median price of $290K. On average, homes in St. Paul sell after 15 days on the market compared to 12 days last year. There were 377 homes sold in July this year, down from 478 last year.

Below is the latest report of the “St. Paul Housing Market” released by the Minneapolis Area REALTORS®. The report compares the St. Paul housing metrics from July 2022 with July 2021.

  • In July 2022, the number of new listings in St. Paul decreased by 23.7 percent.
  • The number of days on the market increased by 4.5% to 23 days.
  • Price Per Square Foot increased 2.8% to $204.
  • The median sales price increased 5.8% to $285,500.
  • The average sales price increased 6.3% to $329,562.
  • Months Supply of Inventory remained the same at 1.6 months.

Minneapolis Metro Area Housing Market Forecast 2022 & 2023

The Minneapolis housing market is shaping up to continue the trend of the last few years as one of the hottest markets in the United States. It is also one of the hottest real estate markets for investing in rental properties. What are the Minneapolis real estate market predictions for 2022 & 2023? Let us look at the price trends recorded by Zillow over the past few years. Since the last decade (Sept 2012), the typical home value in the Minneapolis-St. Paul-Bloomington Metro has appreciated by about 100.7% (Zillow Home Value Index).

Minneapolis metro area home values have gone up by 9.4% over the past year alone. There exists a limited supply of homes in Minneapolis, and buyers are forced to compete often resulting in higher prices and/or quicker sales that tend to benefit sellers. In other words, based on the last month’s key housing market indicators, the demand is exceeding the supply, giving sellers an advantage over buyers in price negotiations. There are fewer homes for sale than there are active buyers in the marketplace.

  • The typical home value of homes in Minneapolis-St. Paul-Bloomington Metro is $377,399, up 9.4% over the past year.
  • The Minneapolis Metro housing market forecast ending with July 2033 is positive.
  • Despite the market cooling off, Zillow predicts that Minneapolis MSA home values may grow by 0.6% by July 2023.
  • If this forecast is correct, Minneapolis Metro home prices will be higher in the 2nd Quarter of 2023 than they were in the 2nd Quarter of 2022.
  • Minneapolis (city) home values have gone up 3.9% over the past year ($342,239 as of July 2022).
  • Saint Paul's home values have gone up 6.6% over the past year ($292,905 as of July 2022).
  • Bloomington home values have gone up 7.4% over the past year ($364,100 as of July 2022).
Minneapolis Housing Market Forecast
Credits: Zillow.com

The real estate activity continues to slow down in the Twin Cities region in this peak home-buying season. Supply is growing during the worst inventory shortage in decades. Median Sales Price is still higher than last year. Days on market are down marginally compared to 2021. In a balanced real estate market, it would take about five to six months for the supply to dwindle to zero.

In terms of months of supply, Minneapolis, or the entire twin cities housing market can become a buyer’s real estate market if the supply increases to more than five months of inventory. In any case, that isn't going to happen, at least not in the next twelve months. This region (and entire Minnesota state) is very much skewed to sellers due to a persistent imbalance in supply and demand. Thus, the housing inventory continues to be constrained.

The mortgage rates have been increasing in 2022. If buyer demand continues to ease, we could see a positive influence on the low inventory of the Twin Cities region while at the same time seeing a negative impact on sales. Also, if listings linger on the market for longer, buyers have a special edge in negotiating sales prices.

As a result, buyers who enter the market at this should have more options than usual when it comes to choosing a property. So they should take advantage of scooping up their favorite deals which otherwise are taken away by seasoned investors in the bidding wars. Whether you’re looking to buy or sell, timing your local market is an important part of real estate investment.

Minneapolis Real Estate Investment: Is It A Good Place For Investment?

Now that you know where Minneapolis is, you probably want to know why we’re recommending it to real estate investors. Is Minneapolis a Good Place Real Estate Investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the Minneapolis housing market forecast for answers on why to put resources into this market.

Let’s talk a bit about Minneapolis and the surrounding metro area before we discuss what lies ahead for investors and homebuyers. With a population of roughly 3.5 million, Minneapolis is the 16th largest metropolis in the United States. This city by the water is known for great cultural organizations that draw a diverse array of residents interested in the performing arts, theatre, music, and writing. Six Fortune 500 companies make their headquarters within the city limits of Minneapolis including Target and Pepsi Americas.

Minneapolis by itself is home to more than four hundred thousand people, making it the largest city in the state of Minnesota and the larger of the Twin Cities. The Twin Cities metro area includes more than three and a half million people, making it the sixteenth largest metro area in the U.S. and the third largest in the Midwest. But unlike much of the Rust Belt, Minneapolis is going strong. This is but one reason to take another look at the Minneapolis housing market.

If you are a home buyer or an investor in the Twin Cities real estate market, you'd know that it has a track record of being one of the best long-term real estate investments in the U.S. over the last ten years or so. In fact, in the Midwest United States, the Minneapolis housing market ranks highest when it comes to a positive market outlook. Inventory is a significant problem throughout Minnesota. The twin city metro area is a strong seller's market due to a persistent shortage of housing supply.

Minneapolis has a mixture of owner-occupied and renter-occupied housing. One or two-bedroom single-family detached homes are the single most common housing type in Minneapolis, according to Neighborhoodscout.com. Other types of housing that are prevalent in Minneapolis include large apartment complexes or high-rise apartments ( 39.84%), duplexes, homes converted to apartments or other small apartment buildings ( 13.14%), and a few row houses and other attached homes ( 3.90%).

Single-family detached homes account for roughly 42.25% of Minneapolis's housing units. At the national level, single-family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single-family rental units. With 2020 being, theoretically, in the middle of a boom, there are still 4 years for residential construction to surge. Most likely, a housing shortage will remain in 2020, keeping home prices high.

In 2016 Minneapolis had moved into the top 20 emerging real estate markets in the country. It is one of the best places in the Midwest U.S. to invest in real estate. Minneapolis real estate has appreciated 86.27% over the last ten years, which is an average annual home appreciation rate of 6.42%, according to NeighborhoodScout.com. This puts Minneapolis in the top 30% nationally for real estate appreciation.

Looking at just the latest twelve months, Minneapolis real estate appreciation rate has been at 9.36%, which is lower than appreciation rates in most communities in America. The home prices in the Minneapolis housing market will be on an upswing all through 2022. In the latest quarter, NeighborhoodScout's data show that house appreciation rates in Minneapolis were at 0.70%, which equates to an annual appreciation rate of 2.82%. Let’s take a look at the number of positive things going on in the Minneapolis real estate market which can help investors who are keen to buy an investment property in this city.

Minneapolis' Strong Job Market

We touched on the strong Minneapolis job market. The Twin Cities job market has been revived by a wave of jobs in the life sciences, biotechnology, and medicine. This has helped to give workers in Minneapolis an average annual salary of six thousand dollars higher than the national average. The city even made a “The Ladders” list for cities with the most $100,000 plus jobs.

That fuels the demand for Minneapolis rental properties at the more expensive end of the market. Yet their location on the Mississippi River and other transit routes contribute to a diverse job ecosystem, where employers like 3G and General Mills maintain manufacturing and food processing hubs. People move here from across Minnesota in search of work, since their unemployment rate is consistently one full percentage point lower than the national average.

Minneapolis' Strong Demand for Housing

Housing markets can be large and declining – Detroit being a shining example, Minneapolis is notable for being a growing city, driving demand for properties in the Minneapolis real estate market. The population growth is driven by both migrations to the area by those seeking jobs and demographic momentum. This is why the Minneapolis housing market is expected to see home price appreciation this year despite the ongoing pandemic.

The month's supply of housing inventory in Minneapolis, the twin cities region, and the entire state of Minnesota is very tight. This entire region is a strong seller's real estate market. One of the defining features of older Rust Belt cities is that they’ve been heavily built up for decades. In the case of the Minneapolis housing market, geography and existing construction constrain the new housing supply.

They can’t build on water or build out in the direction of St. Paul. The city already has suburbs, but people don’t want to move too far out from the urban core where most jobs exist. This forces builders to tear down old buildings to bring new, denser development to the Minneapolis housing market. That is more expensive than building new homes on the farmland. All of this constrains new construction. It also explains why many houisng experts think home prices will rise in the next twelve months.

The Minneapolis Rental Market is Growing

The median sales price in Minneapolis is around $305,000 as of June 2020. It means you can buy several properties in the Minneapolis housing market for the cost of one home in a “hot” market like San Francisco or Los Angeles. The median rental price in Minneapolis is roughly $1,800. This is higher than the Minneapolis metro area rental rate of $1700. Given the appreciation seen in the Minneapolis real estate market, we can expect rental rates to increase faster than the rate of inflation because new construction isn’t going to meet demand.

The Minneapolis real estate market is affordable compared to several booming rental markets across the country. However, the fact remains that the rental market in Minneapolis is growing. Many would-be homebuyers cannot afford to buy their first home, so they have to rent. Students who stay to work compete with economic migrants and the children of locals.

Compounding the matter are the Millennials who watched parents lose homes in the 2007 housing bust and choose to rent though they could afford a home. This explains why the share of the people that rent is growing. 55% of the households in Minneapolis, MN are renter-occupied while 44% are owner-occupied. And this trend will fuel demand for Minneapolis rental properties for years to come. More than 50% of the apartments can be rented for $1,500 or less.

Current Rental Statistics: As of September 12, 2022, the average rent for a 1-bedroom apartment in Minneapolis, MN is $1,215. This is a 2% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Minneapolis remained flat. The average rent for a 1-bedroom apartment decreased by -2% to $1,215, and the average rent for a 2-bedroom apartment decreased by -1% to $1,700.

  • The average rent for a 2-bedroom apartment in Minneapolis, MN is currently $1,700, a 0% increase compared to the previous year.
  • The average rent for a 3-bedroom apartment in Minneapolis, MN is currently $1,950, a 3% increase compared to the previous year.
  • The average rent for a 4-bedroom apartment in Minneapolis, MN is currently $2,400, a 9% increase compared to the previous year.

According to RENTCafé,  the average size for a Minneapolis, MN apartment is 786 square feet, but this number varies greatly depending on unit type, with cheap and luxury alternatives for houses and apartments alike. Studio apartments are the smallest and most affordable, 1-bedroom apartments are closer to the average, while 2-bedroom apartments and 3-bedroom apartments offer more generous square footage.

The Zumper Minneapolis Metro Area Report analyzed active listings last month across 4 metro cities to show the most and least expensive cities and cities with the fastest growing rents. The Minnesota one bedroom median rent was $1,179 last month. Maple Grove was the most expensive city with one bedrooms priced at $1,510 while St Paul was the most affordable city with one bedroom priced at $1,050.

The best place to buy rental property is about finding growing markets. Cities like Maplewood, St. Paul, and Roseville are good for investors looking to get started with rental property ownership at an affordable price. These cities look good for rental property investment this year as rents are growing over there. These trends provide a macro look at the growing rental demand.

Each real estate market has its own unique supply-demand dynamics with unique neighborhoods that present opportunities for investors. Here are the best areas to invest in a rental property in the Minneapolis Metro Area in 2022. Most of these places have the same things in common, including rising rents and increasing property values.

The Fastest Growing Cities For Rents in Minneapolis Metro Area (Y/Y%)

  • Maple Grove had the fastest growing rent, up 11% since this time last year.

The Fastest Growing Cities For Rents in Minneapolis Metro Area (M/M%)

  • Minneapolis rent increased 3.3% last month, making it the fastest growing.
  • St. Louis Park was second with rent climbing 1.8%.
Minneapolis Rental Market Trends
Source: Zumper

The Massive Student Market

Any university creates an excellent opportunity for real estate investors. Every college brings in a large number of students who will need to rent a property close to the university. The rent students pay is based on demand for the school, not the state of the local economy. For investors targeting this niche, Minneapolis rental properties are a great addition to your investment portfolio because of the diverse opportunities this market provides. Because of the university, there are lots of students and activities and venues that specifically cater to the student population.

There are many colleges in Minneapolis itself. The University of Minnesota campuses in the area are some of the largest public university campuses in the US. Augsburg College hosts more than three thousand students. Smaller arts and technical colleges dot the town. Because so many colleges are in the middle of the city, downtown Minneapolis rental properties could be advertised to students at several schools. Then, if the local college of arts and design closes, you don’t have to worry about who else may rent the units.

The University area is very popular with young people and provides not only great nightlife and entertainment but plenty of parks and recreational facilities to enjoy during the day. Housing, from houses for rent to apartments and condos are affordable and near inexpensive restaurants, bars, cafes, and bookstores.

The Landlord-Friendliness of Minneapolis

Many states in the Midwest are more tenant-friendly than landlord-friendly. The Minneapolis housing market, though, is more landlord-friendly. There are limits on late fees, and interest is required on deposits. However, no rental license is required by the state, and there isn’t a grace period set in stone for late rental payments. You can protect your income from Minneapolis rental properties by evicting tenants not only for nonpayment of rent but committing illegal acts on the premises, staying after the lease has ended, and breaching the lease. Just make sure the lease agreement says what actions constitute a breach of lease for which they could be evicted.

The (Relatively) Low Taxes in Minnesota

Houses in Minnesota face an average 1.19% property tax rate. This is very close to the national average of 1.21%. Wisconsin’s tax rate is in this same range, but their higher average property values mean they pay far more in property taxes than those in the cheaper Minneapolis real estate market. Minnesota’s reputation as a high tax state is driven by its higher sin taxes on alcohol and cigarettes and higher than the average sales tax rate. Neither of these affects most real estate investors. Its income taxes are thirteenth highs in the U.S., but it is a bargain compared to states like Illinois. Then again, Illinois has the second-highest property taxes in the country.

The Upward Long-Term Trajectory

Both Wisconsin and Minnesota are seeing growth while much of the Rust Belt deteriorates. However, Minnesota’s policies have led to faster job growth, wage growth, and population growth than Wisconsin. Yet the state has continued to rank well in rankings for quality of life. That makes the Minneapolis real estate market a better deal than the property is theoretically more business-friendly Wisconsin.

Maybe, you have done a bit of real estate investing in Minneapolis or the twin cities region but want to take things further and make it into more than a hobby on the side. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold. Should you consider Minneapolis real estate investment?

Minneapolis offers an ideal mix of a strong job market, affordable real estate, a large rental market, and a limited housing supply. These factors will drive up property values and rental rates growing at a healthy clip for years. The entire twin cities region is a great place to invest in real estate.

Good cash flow from Minneapolis rental property means the investment is, needless to say, profitable. A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding the best investment property in Minneapolis in a growing neighborhood would be key to your success.

When looking for real estate investment opportunities in Minneapolis or anywhere in the country, the generally accepted standard is to purchase a property that will give you a modest but minimum of 1% profit on your investment. An example would be: at $120,000 mortgage or investment cost, $1200 per month rental. That would be the ideal equation for example. Even with rent increases, buying a $500,000 investment property in Minneapolis is not going to get you $5000 per month on rent.

When looking for the best real estate investments in Minneapolis, you should focus on neighborhoods with relatively high population density and employment growth. Both of them translate into high demand for housing. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable.

The neighborhoods should be close to basic amenities, public services, schools, and shopping malls. A cheaper neighborhood in Minneapolis might not be the best place to live in. A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals in Class A neighborhoods.

There are about 699 schools in Minneapolis—231 elementary schools, 176 middle schools, 202 high schools, and 90 private & charter schools. The Minneapolis school system offers a wide range of school choices, from charter schools to great public schools, to those specializing in STEM education. There are 264 neighborhoods in Minneapolis.

Some of the best or popular neighborhoods in Minneapolis are Calhoun-Isles, Camden, Northeast Park, Powderhorn, and Downtown East. Camden is located in the north corner of the city, on the east bank of the Mississippi, is composed of several small neighborhoods. It is one of Minneapolis' most diverse neighborhoods.

There's a great mix of middle and working-class families and housing is rated as affordable.   Northeast Park is becoming popular with young people, provides affordable housing options for every budget. The area has a variety of residential areas, industrial areas and old mills, historic churches, established and new retail areas.

Here are the top neighborhoods in Minneapolis having the highest real estate appreciation rates since 2000—List by Neigborhoodscout.com.

  1. Downtown East
  2. Central Minneapolis East
  3. Ventura Village
  4. Elliot Park South
  5. Lyn-Lake
  6. Powderhorn Northwest
  7. Powderhorn West
  8. Bryant
  9. Powderhorn North
  10. Phillips

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Minneapolis and the Twin Cities region.

Consult with one of the investment counselors who can help build you a custom portfolio of Minneapolis turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best neighborhoods of Minneapolis.

Not just limited to Minneapolis or Twin Cities of Minnesota but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Minneapolis turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.

Let us know other than the Twin Cities region which housing markets you consider best for real estate investing!

Remember, caveat emptor still applies when buying a property anywhere. Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US. 

References

Market Reports & Forecasts
https://www.mplsrealtor.com/
http://maar.stats.10kresearch.com/reports/lmu
https://www.mnrealtor.com/buyers-sellers/marketreports
https://www.zillow.com/Minneapolis-mn/home-values
https://www.littlebighomes.com/real-estate-minneapolis.html
https://www.realtor.com/realestateandhomes-search/Minneapolis_MN/overview
https://www.neighborhoodscout.com/mn/minneapolis/real-estate

Foreclosures
http://maar.stats.10kresearch.com/docs/fss/2020-06/x/report?src=page
https://www.realtytrac.com/statsandtrends/mn/hennepin-county/minneapolis

Job Growth
https://realestate.usnews.com/places/minnesota/minneapolis-st-paul/jobs
https://www.theladders.com/career-advice/these-are-the-15-cities-with-the-most-100k-jobs-in-december-2018
https://www.jsonline.com/story/news/politics/2018/05/08/its-liberal-minnesota-vs-gop-wisconsin-study-economic-growth/590813002

Rental market | Landlord friendly
https://www.collegesimply.com/colleges-near/minnesota/minneapolis
https://www.avail.co/education/laws/minnesota-landlord-tenant-law
https://www.landlordology.com/10-cities-to-buy-rental-property
https://www.minnpost.com/economy/2018/02/why-it-s-extremely-difficult-buy-first-home-minnesota-right-now
https://www.minnpost.com/metro/2019/03/a-majority-of-minneapolis-households-now-rent-their-homes

Low Taxes
https://smartasset.com/taxes/minnesota-property-tax-calculator
https://www.usatoday.com/story/money/taxes/2018/04/06/states-highest-and-lowest-taxes-3-6/48294400

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