Welcome to a new decade! 2019 was a wonderful year for JWB and we’d like to thank you – our clients, residents, vendors, team, family and friends – for your continued trust throughout the years.
In 2019 alone, JWB purchased over 500 properties, renovated over 500 properties, built over 400 properties, sold roughly 450 properties and increased our properties under management to about 3,200. That’s a lot of production (our biggest year yet!) and it takes a lot of confidence in our business model as well as a strong handle on the Jacksonville real estate market in order to align our resources to accomplish those numbers.
In today’s article, I’d like to explain the metrics we track internally here at JWB and bring you our Q4 Jacksonville real estate market update. And, as we look forward to 2020, I’ve thrown in my predictions for what you’ll see transpire in the new year. Enjoy!
Q4 Jacksonville Real Estate Market Update
The October median house price in Jacksonville was $235k. This was down slightly from the 2019 high of $250k in June. This was to be expected as seasonality plays into pricing and pricing typically reaches its high in the summer months when everyone is out trying to buy a home. Prices generally come down slightly in Q4.
Fun fact: I do our predictions each year for my business partners and I predicted that the median price would reach a level between $248k-$252k in 2019 here in Jacksonville. I was spot on!
Year over year appreciation in Jacksonville comes in at roughly 5%, which is represents a “normal” market in Jacksonville. Since 1991, real estate prices in Jacksonville have increased, on average, roughly 4.3% each year. This is significant because this is the historical trend line that we expect a “normal” market in Jacksonville to follow.
In the past few years, we’ve been seeing appreciation rates of 8-12% and that is just not sustainable. That’s why I predicted that we would see roughly 4-5% appreciation in 2019 as the market settles down into what the historical “normal” has been. This, overall, is a good thing for the real estate market here in Jacksonville.
While it is important to have a handle on home price appreciation rates each year, it is more important to have the right mindset regarding appreciation when it comes to investing in rental properties. JWB clients typically plan to hold onto their investments 10-20 years because it is important for a real estate cycle to play out. When you hold for this length of time, history teaches us that the average appreciation rate each year will be roughly 4.3%. This takes the “speculative” part out of home price appreciation.
To highlight this point, from 2001 to 2019 we have experienced what will most likely be the most volatile pricing we should see in a real estate market. However, many would be surprised to know that from 2001 to 2019 we have averaged just around 4% appreciation each year. This shows the strength of the buy-and-hold mentality when it comes to rental properties and how you can benefit from long term price appreciation.
Months of Inventory (MOI)
The months of inventory (MOI) concept is a short-term indicator for what’s happening. This shows if it’s a buyer’s or seller’s market.
To find the MOI, divide the total number of homes on the market by the number of homes sold in the prior month. That’s how many months it would take to exhaust the inventory in the market. Six months is an equilibrium between buyers and sellers.
Right now, Jacksonville is at three months of inventory, indicating home prices will rise even faster than average.
Jacksonville’s MOI has been below 5 MOI every month since 2013; that is directly correlated to the higher-than-normal home price appreciation we have seen over that time period.
- Home prices will appreciate roughly 4.5-5% and the high median home price in Jacksonville will be between $258k-$263k.
- Demand for entry-level homes ($200k and below) will continue to increase due to lack of supply. This will be the highest appreciating section of the real estate market in Jacksonville.
- There will be more, new entrants from institutional buyers as the SFR asset class is now very appealing for Wall Street and is continuing to attract a lot of money.
Keep up with our ongoing market reviews at facebook.com/cashflowproperties. If you’re ready to kick of the new decade with us, reach out at firstname.lastname@example.org or 904-677-6777 to continue the conversation.