Houston trends concerning rentals SFR
Curious to what others think about this market as it relates to SFR rentals. I've bolded my concerns. Basically sales prices are going up while inventory is increasing and rent is decreasing. Property taxes are going up without the ability to pass the cost on to renters. While the sale side of the market appears healthy it makes me question the long term trends and where we are in the cycle. On top of that interest rates have increased and added pressure on new rental purchases. My own numbers are telling me that I have to purchase a house at %70 ARV to even consider it for a rental. But then I ask myself why make $200 - $300 per month(net all costs) when I could make $20,000 to $30,000 just flipping it instead.
What are you guys seeing in your local areas: sugarland, Conroe, katy, clear lake, kingwood, willis, Houston, spring and surrounding areas.
May 2017
Single-family home sales rose 11.5 percent year-over-year with 8,156 units sold;
Total property sales increased 12.3 percent with 9,744 units sold;
Total dollar volume jumped 17.4 percent to $2.8 billion;
The single-family home median price rose 4.4 percent to a record high of $235,000;
The single-family home average price climbed 4.3 percent to $302,362, which was the second highest level of all time (highest was $302,629 in June 2015);
Single-family homes months of inventory grew to a 4.1-months supply, the highest level since November 2012;
Townhome/condominium sales surged 16.5 percent, with the average price up 3.1 percent to $206,363 and the median price up 0.9 percent to $163,500;
Leases of single-family homes soared 31.0 percent with average rent down 4.2 percent to $1,779;
Volume of townhome/condominium leases rocketed 46.2 percent with average rent down 6.7 percent to $1,565.
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In the neighborhoods that we've been looking at in Sugar Land and SW Houston, there doesn't seem to be much difference between ARV and a house that hasn't been updated. We've seen houses that haven't been updated in 40 years selling for about the same amount as a flip.
I recently talked to a flipper who was looking at a house that I was also looking at. The seller was willing to come down about $15K from what similar houses were going for, which left the price somewhere around $160K. We both agreed that the numbers wouldn't work for either a flip or a buy and hold.
Another investor recently told me that he's also frustrated. Even foreclosures in the Sugar Land area can get bid up too high for a flip to make sense.