Our Crazy Real Estate Investing Market Right Now
Old man giving a thumbs up because he was just approved for a loan

Written by Brian Johnson

Engineer, investor, REALTOR®, and Ten Properties owner, I help new investors use data to build their real estate empire. Connect with me today to start building your ten.

November 11, 2020

A year ago builders were practically giving away homes, with ultra-low prices, and huge incentives. What a difference a year makes for real estate investing!

I was researching new construction in East Austin for a client today, and thought I’d share how crazy this market has become. Out of 20+ subdivisions, only ONE is currently open to investors. And even that one is on a waiting list, with a special bidding process, and super high earnest money just to secure a bid. This puts new construction (at least in certain areas) almost completely out of reach for investors. How times have changed!

This is all the result of a series of “perfect storm” events:

  1. A glut of inventory due to over-zealous building and a huge abundance of cheap land, making prices on new construction oftentimes better than resale and driving up demand.
  2. A global pandemic that created a shortage in labor and materials causing delays in existing builds and slowing new starts.
  3. Ridiculously low interest rates.
  4. A surge in capital, as investors move more and more money out of stocks and into real estate.

The temporary dip in supply, coupled with a huge surge in demand, meant that builders are now struggling to keep up. There has always been the 10% cap on investor-sold homes, but many builders are now hitting it as soon as they open. Several builders (like Meritage and KB Homes) have even gone as far as prohibiting investors altogether.

A year ago builders were practically giving away homes, with ultra-low prices, and huge incentives. What a difference a year makes!

What should I do as an investor?

Investing strategies ebb and flow with different markets. When buying into a seller’s market, you’ll want to look for the best deal, paying less attention to cashflow. Rent is always a trailing indicator as it takes time to catch up to prices, so don’t worry too much if your cashflow isn’t great. Look for homes that are at or below value, even rehabs if that’s your game. In a seller’s market, it’s all about price and appreciation. Be pre-approved (or pay cash) and be ready to bid above-ask the moment the home comes on the market. And as I always like to say, this is where having a great real estate agent can make all the difference.

Happy hunting!

Read more real estate investing articles like this on the Ten Properties blog

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