Good morning BP Homies!
I attended the age old "Texas Tuesday" traditional courthouse auction lawn party yesterday and witnessed some interesting things I wanted to share.
For those that may not know, the market here in San Antonio is pretty strapped for inventory. We're hovering at about 1.2 months of inventory, all price metrics are in the double digit increase levels year over year, our active listings are down almost 55% from the same time last year, our total sales are increasing, and our average DOMs have plummeted to the lowest levels I've seen in as far back as I cared to research. Last month I tracked 82 rehabbed properties that sold well above their listed price, with crazy low DOMS and seller concessions. I don't need to say too much more to show that the market is really hot but starving for more inventory.
The code of the fix and flip investor for some time has been 70% of ARV minus repairs. The new and seasoned investors piled into the courthouse lawn hoping to find that and you can guess what happened next. The circles of eager bidders form around the trustee, he calls out the next property to be auctioned off, numbers start flying, and a winner is announced. Now, to clarify I'd done some research in advance and purchased a binder of the properties to be auctioned off yesterday and I ran my own comps on them to determine what I thought I could sell them for on the backside of a remodel. I, like most auction buyers, was only working with limited information, had not driven by these properties, and had not gotten access to them in advance to get a feel for what the rehab needs for the properties would be. I picked a few properties out and wanted to see what would happen when they were announced to be sold. Not to my surprise I watched as these properties bid up to 80%, 85%, 90%+ of what I thought a reasonable ARV would be for the properties. I work with an investor that has been buying from the auction for a while and we stepped to the side to review the situation and he wore a clear cut look of confusion on his face as he was quickly outbid on the properties he was targeting. A lot of the seasoned buyers I'd seen there so many months before wore a similar expression. Some walked away with deals, others not so lucky.
The market is nutty for sure but I'm curious as to what all these people are seeing. Our market is posting crazy appreciation numbers currently - perhaps they're buying at higher percentages believing the properties will be worth so much more within the next 5-10 years. We're seeing example after example of homes with quality rehabs setting the market after fierce bidding wars and sales prices $10k, $15k, $30k above the asking price - maybe they see the current market climate as an opportunity to push. I've seen a few buyers pick up deals and just turn around and list them as is at or above what I'd think was a reasonable ARV and they sell - maybe they're just cashing in on a short term arbitrage play window.
There's still a lot of opportunity here and A TON of room to grow as a city. The San Antonio Economic Development Foundation recently greenlit the "All In SATX" plan that's a $55 billion dollar expansion play targeting 140,000 new jobs here by 2025. See the story HERE for more info. The issue the city could see moving forward is reaching an affordability ceiling as our valuation increases far outpace the rise in our incomes. 140,000 new jobs is nothing to shake a stick at so I'm hoping this helps. Feds have claimed they have no targets to hike rates until after 2023 - see that story HERE. There's still so many people moving here year over year that we're having trouble developing new housing fast enough - especially with the way costs on that side have risen. The demand is so high and growing which is why we're seeing such high valuation jumps across the board. That's a huge opportunity.
There are still a lot of areas where you can pick up properties at or below the $100k mark that could potentially boom as the other areas surrounding them get to be so high priced relatively and buyers spread their wings. Take the 78207 Zip Code for example.
From 2018-2019, the average sale price in this zip code jumped 16.14%. From 2019-2020 the average sale price jumped 27.74%. The 2020 average sale price for this zip code was just below $102k. The average Sale Price for last month across Bexar County was over $313k. Seems like this area has a LONG way to go. There are a few other examples of areas like this but I'm thinking its a more targeted focus in areas that have this sort of affordability and growth potential that we might see become more popular in the coming years. **Obviously consult a local pro before looking into these areas and do your due diligence on anything brought to you. That being said, the data above is head turning to say the least.
I'd like to hear from other market participants.
For those that are buying here in San Antonio (or agents that are working with investors), how have you adjusted to the current climate? Are you changing strategies, opening up to new areas, seeking other investment vehicles?
Happy Hunting!
