Throughout the first half of 2021, real estate prices have been climbing across the United States. Many real estate investors want to know Jacksonville, Florida real estate status and if we expect to see a drop in house prices.
In this episode of the Not Your Average Investor show, JWB Co-Founder Alex Sifakis shares insider information about lumber prices, the inventory of existing homes, mortgage rates, and the current status of home sales. If you are interested in investing in the Jacksonville real estate market during 2021, you're in the right place for finding critical information deemed reliable from experts in the housing market.
What's Going On With The New Construction By JWB?
Permitting is getting done, and it's crazy busy now. The number of permits has gone up now that the permit office in JAX is fully staffed and in full operation.
Every Tuesday morning at JWB, we make predictions of how many homes we're going to sell, rent, and produce. The team reports on what we're doing well and on what we're behind in. All the moving pieces come together.
We often discuss new construction in our meetings since JWB has bought lots of undeveloped land over the years to be well-positioned with enough rental property inventory. However, we couldn't control the Building Permit Department in Jacksonville, Florida, which was an issue for our construction team. We've been waiting for the bottleneck to come through.
In the previous months, we've seen 25 permits come through each month. For June, we've had 73 new construction homes permitted to begin! That's a huge jump.
These permits were in for six months, and now we can finally get started. The building department worked hard to hire more people to meet the needs of builders like us. We appreciate the Building Permit Department of Jacksonville pushing so many of our permits through.
What's Going On With The JAX Real Estate Market?
We have just over one month of housing inventory, and the amount of appreciation is crazy. June 2021 shows a 20% rate of appreciation, which is way above the year over year 4% annual average for the Jacksonville, FL real estate market!
When you break down the data, you'll even see appreciation differences within the month! Within a two-week period of June, there was a 3% rate of appreciation.
Much of what we share on the NYAI show includes Alex's JAX real estate market numbers. We have not seen real estate prices going down, even during COVID, due to inventory shortage. We were pulling data on house pricing, inventory, pending sales, and looking at all the aspects of the real estate market.
Many buyers wanted to invest in single-family homes as rentals, so we decided to continue buying throughout COVID. What JWB has done is different from many investors within Jacksonville. It's a great thing we continue to have inventory because the shortage of real estate continues.
To be completely transparent, the JWB team was terrified at the onset of COVID! We didn't know what the future would hold for our investors and residents. But, the numbers we've been watching for the market don't lie, and even though we were nervous, our steady actions have helped us come out on top.
Our opinions were contrary to other Jacksonville, Florida real estate investment firms, but the numbers have said it's wise to continue purchasing rental properties in the current housing market.
What Impacts The Demand For Jacksonville Real Estate?
There are a lot of drivers keeping the Jacksonville, FL real estate market in high demand. People are continuously moving into Florida, appreciation continues to rise each year, and businesses are moving into Florida.
Plus, the inventory of single-family homes to purchase is low. Interest rates remain low, and the prices for Jacksonville, FL real estate are still affordable compared to the median home price in other markets.
Additionally, we have received exciting information on interest rates lately. We have heard rates are going to go up, but that's not for sure. A reliable source related to the Federal Reserve says interest rates could remain stable for a while.
Is There A National Real Estate Market?
No. There are various real estate markets around the country based on major metropolitan areas. Just because something is going on in San Francisco or Texas does not mean the pricing and demand are the same in Florida.
When you have such a high amount of population growth in Florida because of the low taxes and JAX as a micro-economy, it's hard to conclude that we will have a drop in real estate prices anytime soon.
What Will Happen As People Go Back To Work?
We see that the other 49 states will have to compete with Florida tax-wise because remote workers can select where they want to live. Several major corporations are moving into Jacksonville and throughout Florida, so we'll continue to see workers residing in Florida.
Tech migration reinforces existing growth trends in smaller and relatively affordable markets, including Jacksonville. Because of that, higher-paying jobs are moving into the area.
What's Going On With Lumber Prices?
Price fluctuations for lumber are happening right now. The lumber prices were way up, and now they're going down.
Lumber prices increased dramatically during COVID, as have shingles, appliances, etc. The builders have been tacking on these price increases to the owners of the houses they're building. Fortunately, the supply chain issues are getting ironed out, and we see more lumber supply, which drives costs down.
The price to construct a house is starting to fall, too. Now, the builder has a margin to decrease their sales price and still can make a profit. Lower-priced lumber can help slow down the speed at which housing prices increase, but we're still in a shortage.
Are Rents Going Up Too?
Rents are skyrocketing! JWB is renting 25-30 houses per week, which means our real estate investors are getting excellent cash flow returns on their investment.
Even now, in 2021, we may not catch up to the number of permits we need to complete all of the new construction we're doing. We've not yet built the number of units required to meet demand. Compared to JWB, many developers are also developing lots, but they're not hitting the market with finished homes for 2-3 years.
We see a shortage of over 6 Million houses across the United States! Since the Great Recession, there have been things to create this shortage because municipalities made it harder to build out the land into housing. So yes, rents are expected to rise right along with the real estate prices.
When Real Estate Is A Hedge Against Inflation, What Does That Mean?
When inflation increases, so do prices. If prices increase faster, but your costs are fixed, you're in good shape in an inflationary environment. If you can lock in your interest rate at a lower rate, it's a hedge against inflation.
How does this help when real estate prices go up? There's the fact that you have a hard asset, and rent prices and home prices are going up in an inflationary timeframe. When you secure the debt at a 4.5% interest rate, it gets easier to pay that debt down as your dollars grow due to inflation.
Right now, inflation is becoming influential in financial strategies and those who believe in an increasingly inflationary environment. Hard Assets (real estate) and leverage (paying down the loan with “cheaper” future monies) is a great strategy.
There is value in holding onto debt at a fixed rate if you plan to keep the property for an entire real estate cycle of 10 – 20 years. Many JWB real estate investors love the idea of adding additional rental properties and taking advantage of great rates and future inflation. The only cons are simply additional risk (through more loans) and time.
Is It Still A Good Time To Invest In Jacksonville Real Estate?
Yes! JWB has always been conservative with its profit-making projections for investors. But now, we are confident in saying it's the perfect time to buy. Low-interest rates, higher inflation, and affordable pricing indicate the ideal time to buy rental properties is right now.
We expect interest rates will remain flat as inflation continues to grow. If you can get smart debt and hold it in place for 30 years, that's a great way to invest.
The United States is unique for real estate investors, for 30-year loans are not typically seen in other countries. In Canada, for example, debt is in place for the short term and at an adjustable rate after five or so years. The way the financing system is set up here in the United States, you can invest in rental properties to handle risk mitigation.
Here's why our real estate investors feel it is a great time to invest in Jacksonville, Florida real estate for single-family homes:
- When they own more rental properties, it creates more income sources
- They get to leverage at great rates to increase equity & appreciation
- They receive positive cash flow plus appreciation
- Turnkey rental properties provide inflation protection and preservation of capital
What About Modular & 3D Printing To Meet Development Demand?
There are numerous conversations Alex Sifakis has to see if it's worth JWB to partner with those building companies. For example, the shipping containers project was not as affordable as we thought it would be. It was 50% more pricey than expected.
Modular and 3-D printed homes are not yet ready for primetime, but JWB wants to be at the forefront of these evolving technologies. We think it may be another 5 to 10 years out for our investors to buy affordable rental properties through these avenues.
We want to continue to deliver excellent returns for our investors. That is why we are vertically integrating ourselves into the development of Downtown Jacksonville. JWB continues to look at shipping container homes and 3-D printing homes. We want to invest in new technologies to solve the shortage problems and help our investors return.
JWB looks at 10-year and 20-year problems that we see for Jacksonville. We are looking at the long game in the JAX real estate market.
We Shared Three Secrets About Jacksonville's Real Estate Prices:
- Building permits got opened up, and JWB will soon build 73 new homes.
- Alex has info that the FED isn't doing to raise interest rates soon.
- Lumber prices have dropped, and that means builders are going to be able to make more money.
Here's what's not so secret. Despite real estate prices going up, 2021 is still an ideal time to buy rental properties in the Jacksonville, FL real estate market. As always, we appreciate having Alex Sifakis on the Not Your Average Investor show.
How Can I Find Out More About The JWB Property Management Side?
Join us on Thursdays for the property of the Week show to get a granular look at how the rents and house prices in Jacksonville produce positive cash flow for our turnkey rental property investors.
Join our Facebook Group, Jacksonville Rental Property Investing, our new name, if you enjoyed today's show. You will find an active Facebook community at www.jwbfacebookgroup.com.
You can also go to www.jwbinventory.com to see what properties are currently available. We encourage you to contact the JWB team for a consultation to determine how our property management team can be of service in providing passive income cash flow.
When you are ready to take the next step with Jacksonville real estate, visit www.chatwithjwb.com. We will walk you through the numbers to show you what your potential Return On Investment will be.
We hope you enjoyed learning how Alex Sifakis and the JWB team predict that real estate prices will continue to rise in the Jacksonville, Florida real estate market. The excitement around more permits for new construction, lower lumber prices, affordable house prices, and low-interest rates benefit the entire real estate market in JAX. If you have questions about real estate investing with JWB, contact us. You'll be glad you did!
To Your Success,