Buy? Sell? Hold? 2020 will be an especially challenging time for investors because the economy is slowing, trade wars could drastically affect specific localities, and some of the hottest real estate markets are already cooling down. Here are some trends that might investors will see in this year along the MS Gulf Coast.
Greater Concentration of Demand
The US economy is always changing, but the concentration of new jobs – and therefore of new demand for housing – in a small number of big markets is something new. And it will continue for years because the nature of jobs is changing. We already know that most jobs are service or office jobs; what’s changing is that the businesses that provide these jobs need more and more of the support services that are most efficiently delivered in big markets. What this means for investors is that demand for housing in big markets almost certainly will continue to grow faster than builders can create more supply. In other words, prices will keep going up and so will rents.
Slowing Home Prices
That doesn’t mean that prices can go up forever. Although demand for housing in the big markets will be strong, prices of single-family homes have already peaked in San Francisco, Silicon Valley and Seattle, and have slowed considerably in many other markets. That always happens when home prices outrun local incomes for a while – at some point they have to stop and wait for incomes to catch up. On average, US home prices were up 5 percent last year. I expect they’ll be up just 3 percent in 2020. This can mean different things for different investors. If you were thinking of cashing in a property and getting out of a market, now is the time. If you were thinking of investing in any of the boom markets, realize that you might be buying at the peak. And if you want a safer investment in boom markets, consider apartments instead of single-family homes.
The big question in markets that are peaking is, what happens next? Boom markets usually end in a bust – and these might – but if the local economy keeps humming along prices could just go sideways for years.
Bigger Gap Between Owning and Renting
The surge in home prices in recent years, especially in many of the big markets, puts a single-family home beyond the reach of more people. This is good news for investors in rental property but also means that it’s difficult to just buy a single-family home and rent it out: the number of people who can afford the high rent is small.
In short, if you are an investor, you should sit tight on buying but sell what you have! The housing market is strong along the MS Gulf Coast and it is a great time to sell. Apartment complexes are hard to find but definitely worth the investment as the market will shift soon enough! Stay in populated areas such as Gulfport and Biloxi where the job market is strong and median income is mid-low.
Image by the Sun Herald
By: Ingo Winzer via Forbes & Amanda D’Angelo of Coastal Realty Group in MS