MIDWEST: MIDWAY, 2020
East North Central: IL, OH, WI, IN, MI
Despite having several cities on the national list of most-affordable locales (ReFi Guide), the COVID-19 pandemic has only served to worsen the outlook, and further compound problems for, Illinois. One of the weakest housing markets in the country even before anyone knew what COVID was, the virus resulted in surging unemployment claims to 1.5M; as a consequence, there was also a 79% increase in homes delinquent on mortgage payments (Mortgage Bankers Association), making it the highest figure for Illinois since the 2008 housing crisis (Illinois Policy Institute). Combined with the third-lowest housing appreciation in the nation, and the second-highest foreclosure rate in the country, investors would be wise to completely avoid the state entirely, even when tempted by the sticker price at the conclusion of the federal moratorium. There is too much instability in the market, and too many issues on a state level outside of COVID, to recommend the investment.
Franklin County, Ohio, has long been one of the strongest housing markets in the country, as it’s crown jewel, Columbus, has remained a constant over the last few years. Home values are up 20% in the last three years (Franklin County Assessor’s Office). Given the long-term stability of the area, the strength of the values, and the lower-than-average unemployment rate of ~8% (US Bureau of Labor Statistics), investors should look for opportunities throughout the county—particularly in early 2021 when auctions begin again.
Summer was a record-setting time for the Wisconsin home sales; home sales are just 1% below pace for 2020 as compared to 2020 (Wisconsin Realtors Association). Median home prices are up 8.8% to ~$219K. Following the trend of much of the nation, home sales in Wisconsin’s more-rural north increased ~16%, while sales around denser metros held steady.
Central Indiana leads the way for the state with a red-hot market. Median sales prices are up over 14% from 2019, via MIBOR Realtor Association. That figure is the highest in a decade, as the last such jump was in April 2010; the yearly increase sits just above 11%. Interestingly, these booming figures cannot be chalked up to a bottle-neck effect as a consequence of an early spring shutdown; Indiana deemed real estate services “essential,” meaning that these sales are surging without a lockdown boost seen in other areas of the country. Double-digit inventory drops have spurred the success; if the current pace holds, it will outshine 2019’s record-smashing residential real estate metrics.
Michigan’s affordability crisis was fairly significant before the COVID-19 epidemic, and the rush for more space and private homes has compounded those issues. From 2015-2020, homes prices in suburban areas like Ann Arbor rose 24% to over $452K; meanwhile, the median household income in the college town is just over $61K (Bridge Michigan). With college up in the air for many students in light of the pandemic, in addition to the costs, investment remains suspect. Meanwhile, in Detroit, things are decidedly uneven given the city’s rocky history: rental demand is booming and rents are up 23% (Click on Detroit). Single-family rentals are in high demand, but with the economy contracting, areas like Detroit, that have not yet recovered from the Great Recession, are most susceptible to further contraction, particularly around the auto industry. Without further stability, it would be wise to stay away.
West North Central: IA, KS, MO, NE
Demand is soaring as the summer draws to a close in the Quad Cities and throughout Iowa. Inventory is down 19% from 2019, replicating much of the issues throughout the country (Quad-City Times). Additionally, unemployment peaked at 15% at the height of the first wave but still remains above 9% through the end of July. Ruhl & Ruhl realtors report the lowest housing inventory since 1980. Given the demand, if affordable options come on the market once moratoriums expire, it might make sense for a 3-5 year investment plan before a flip.
Kansas City saw home valuation increase of over ~6% from 2019, even with a pandemic raging (Kansas City Business Journal), the 15th-largest home value nationally. By contrast, inventory is down a staggering 42%, the third-largest drop in the nation. With median home prices at around $214K, opportunities might be scarce, but worth it, should the situation arise in the metro area.
Nebraska is among the state’s recovering the best from any downturns suffered as a consequence of coronavirus. According to Moody’s, the economy in the state is at 88% of what it was in March, and unemployment remains below 5%. A more rural state that saw less virus spread, it imposed no stay-at-home order which is paying dividends: homes are now going fastest in the country in Nebraska, at a paltry ~17 average days on the market (Cincinnati Business Courier).
St. Louis appears to be among the more stable urban metros in the country. Home prices in the St. Louis metro area are up ~5% from 2019, a more modest gain than comparable cities (St. Louis Post Dispatch). Since 2011, housing prices have increased by 46%. That stable, sustained growth, combined with the luxury of a city that is more spread out, has put St. Louis as a desirable market. As millennials look for alternatives to the cities in more affordable locales, St. Louis may present itself as a strong option- and an option for flippers to take advantage of the projected continued growth.