Which phase of the market cycle is Jacksonville Florida?

22 Replies

There is a lot of talk about Jacksonville, FL as a "hot" market for investment. Forbes wrote an article in early 2017 which put JAX high on the list of good places to invest (based on job growth, unemployment, foreclosures, etc.). As investor I see both the positive trends, and a market that is getting so much attention that deals are harder to come by.

Rents seem to be going up, but for how long?

For anyone who is also investing in the area, tracking metrics like price per foot, etc. where do they think the market is right now?

Looking to start a good data backed discussion, let's hear your thoughts!

Just recently we started imputing investment properties for Jacksonville ( i saw that same forbes article as well). What i can say is that comparing the undervalue properties to other cities, Jacksonville seems to have a large portion of investments far below the ARV. I think there are still good deal on the market but that doesn't mean they are listed very long. I feel finding mis listed, non conforming bedroom, rentable guest suites, or multiple units combined under one SF listing can help beat out the competition in fast moving markets.

As long as the banks are willing to put capital to work in Jacksonville, its a great spot for investing. I am buying and I am selling properties in the area. 

I buy 2 a month in Jacksonville. very strong rental market.

@Mark Fries what metrics or data are you looking at that make you say it is a strong market? 

1. I get qualified tenants within 24 hrs of my properties posting. the demand is very strong 2. lots of deals still available 3. 15-20% ROI on each deal...or more

Growth in the city is amazing, they are building and adding more apartments all over town. There are not enough housing units for the people moving here. The quantity of homes on the market is very low, coupled with new businesses coming here, and permits are up as well. Nassau County is now the fastest growing county, just north of Duval/Jacksonville, in the state. Amazon has (4) distribution centers here, the Port is spending 424 million on dredging to 50 feet, the logistics business is crazy nuts here in Jax. 

@Seavron Banus if Jacksonville is similar to Tampa right now, I'd say we are in between the Growth and Saturation phase. Maybe a bit of cooling off (leveling out) but think that we might be due for a correction in the next 24 months.

@Jeremy Kloter , Makes sense. I currently have been using the market phase framework from David Lindahl's book Emerging Real Estate Markets--and have come up with a similar assessment. The good--growth projections from census bureau, low unemployment, rents rising (was just able to bump rent in my 4plex in orange park), and a number of elements that @Jack Bobeck mentioned. The bad--national attention via Forbes articles and others makes JAX a "hot" market, more extreme storm patterns, lots of new construction (although this could be seen multiple ways).

@Jack Bobeck Great inputs, appreciate the thoughtful response and use of different data points to back up your thinking. A lot of the same reasons you mentioned are what got me to invest in the area as well.

This was posted today from the Jacksonville Business Journal, the post on a daily basis and if you really want to know what is going on in Jacksonville, you need to subscribe, its $84 a year. 

Investment in Jacksonville commercial real estate came in 29 percent higher in 2017 than in 2016 with $2.57 billion in transactions, according to Colliers International of Northeast Florida.

The year end investment report broke down the major sectors of commercial real estate by office, industrial, hotels, retail and multifamily.

In Northeast Florida, as in most major markets across the country, the lion's share — 61 percent — of investment has landed in multifamily properties, with $1.56 billion of real estate transactions recorded in 2017.

There was $315 million of warehouse/industrial properties change hands in Northeast Florida in 2017, representing 12 percent of the total. However, the Colliers report noted that 85 percent of the $315 million came in five portfolio deals involving institutional investors.

Months of inventory in Jacksonville is very low.  This tracks the # of houses on the market divided by the # of houses that sold last month.  Below 6 MOI is an indicator of higher than normal appreciation in the short run.  About 7 indicates lower than normal appreciation.  From 1978 to current, the avg appreciation rate in Jacksonville is 3.8% so we deem that “normal.”  MOI has been in the 4-6 range since 2013 so it’s not surprising that we’ve seen above avg appreciation since that time.  And MOI is much lower today.  Dipping into the 2’s.  You’re going to see prices going up in Jax until supply increases.  But building in the middle income and below middle income neighborhoods hasn’t happened much in recent years because prices aren’t high enough for a builder to make a profit.  Prices need to go up to give an incentive for builders to increase supply. We’re expecting higher than normal appreciation in the short run in Jax (12-18 months.). Hope this helps!

I meant to say above 7 months is an indicator of lower than normal appreciation in the short run.  :)

@Gregg Cohen respect you and Alex and what you guys have built at JWB. I am currently recommending investors look at your model, if they are looking to buy in Jax. JWB buys, fixes, finds tenants, and manages a solution for the investor. The investor gets a safe investment at a nice return. It’s a proven solution.

What I am seeing is the properties on the courthouse steps are selling for more than the ARV. Investors are pushing the market and those of us that bought in 2012/2013 are seeing huge appreciation. I am not a buyer here, I am a seller.

Economists are forecasting a recession next year or the following as wages rise and int rates rise to fight inflation. Real estate does go in cycles, it feels as if the market needs a breather or to take a break, the Ave price of a home fell for the first time in Jan 2018 in quite some time.

Again, you guys are great for Jacksonville!

If you like that part of Florida also look in St. Augustine which is like a suburb to Jacksonville. You can capitalize on seasonal rentals there.

@Gregg Cohen Great inputs, I actually spoke with your partner Adam briefly last week--and we spoke about MOI as well. Turns out you guys will be managing my property come April--via your recent acquisition of small portfolio of PM clients. I  just sent you a message / connection request. 

Looking forward to discussing further!

GO SOUTH YOUNG MAN, GO SOUTH!

Jacksonville?  That's not FL!  You may as well be in GA.    

Best to drop down and buy, rent and flip where the "bigger pockets" clientele and truly Hot areas, West coast from Tampa down south, and from over to Orlando, up to Daytona down the East side to the Keys!

Steve McRory, Lender in FL (#360492)
888-662-4404

@Jack Bobeck - Thanks for recommending us! Always great to connect with you after so many years. Seeing properties sell at the courthouse steps for more than ARV surely is one sign that investors are over-paying. There are a lot of data points to consider when forecasting and you've brought up a few that should be taken into account as well.

@Seavron - Nice to meet you!  Looking forward to having you as a client.

All who mentioned that Jacksonville is really southern GA....very true!

The top just like every other city across the nation due to US economic expansion period. Rising interest rates will correct cap rates just like every other market as revenue growth slows.

If you're talking about 20+ year holds market cycles don't matter as much.

I get calls from all over the country from borrowers and by far, the reason for moving to Jacksonville/ Lower GA (where my family is from and relatives live) is due to job transfer or moving to be close to relatives.  Few think to themselves, ...."Hmmmm, I want to move to FL,  I guess I better check out Jacksonville!" Please!

Listen to good advice, draw a line from Tampa Bay over to Orlando and up to Daytona, then invest south of that line.   

  

Steve McRory, Lender in FL (#360492)
888-662-4404

Join the Largest Real Estate Investing Community

Basic membership is free, forever.