Great fundamentals and future prospects
There are many positives for the Jacksonville market for 2021 and future years. Jacksonville home prices will continue to rise in 2021, with the largest appreciation in the lower price tier. The historically low interest rates will continue to motivate buyers to compete for limited inventory. Mortgage interest rates are expected to remain low until 2022, but signs of inflation are beginning to show which could cause the FED to raise rates earlier than expected.
HOME PRICE METRICS
The median home value in Jacksonville was $270,000 in November 2020, up over 7.5 percent year-over-year. Owners in the area have realized a five-year increase of 34 percent and a 10-year surge in prices of over 56 percent. New listing inventory has been steadily declining month over month since April, and total active inventory has plunged by nearly 45 percent lower than November of 2019.
Areas to the northwest of the St. Johns river have lower median prices for single-family homes near $200k, leading to many high yield opportunities for investors. The most expensive areas between Jacksonville Beach and St. Augustine starting around $400k to well above $1M+ near the coastline.
Jacksonville MSA Home Price Forecast through 2021
Many higher paying job industries have nearly recovered from pre-COVID levels due to flexibility of work-from-home. Real (non-stimulus) income is expected to stay flat or possibly decrease slightly as businesses recalibrate from a tough year.
Inward population migration, a strong job market and years of under-building signal continuing demand pressure to support prices. Current average days-on-market is only 45 days and listings vs sales show an 8-year low of less than 2 months of inventory on the market at the end of 2020.
Risks for 2021 include variability around expiring forbearance and eviction policies. The Department of Housing and Urban Development recently announced that the FHA is granting a two-month extension of its foreclosure and eviction moratorium and initial forbearance requests through February 28, 2021. However, once the consumer protections expire, spikes in foreclosures and evictions could flood the market with inventory and have a negative effect on prices. HUD’s Dec 1st report shows FHA delinquencies around 17.7 percent (8,695) with serious delinquencies at 12.3 percent (6,050) for the Jacksonville market.
2021 SFR Housing Price Forecast: +3 percent to +5 percent
Disclaimer: The variability around this forecast is wide and dependent upon data available as of September 2020. The severity and duration of the COVID-19 epidemic, as well as the response of the public and policymakers, continues to change daily.
As of November 2020, the median three-bedroom, SFR home in the Jacksonville MSA is $1,480/mo, an increase of 6.3 percent from last year. Real estate investors in the Jacksonville market have had strong SFR rent price appreciation over the last five years with an average increase near 26 percent. Rental appreciation is among the top performing markets, and is very healthy for median wage growth to be slightly higher than rent increases.
Areas east of the St. Johns River have many of the largest 5-year increases, and several sub-markets have seen rental prices rise over 35 percent.
The market-level rent-to-income ratio is at 29.5 percent, which is just below the national average of 32 percent for metro MSAs. Only a few areas close to downtown and along the coastline by St. Augustine have areas which are becoming unaffordable with R/I ratios over 40 percent. Gross Rental yields for single-family properties average 9.8 percent for the metro, with many sub-market areas well above 10 percent.
Congress included $25 billion in renter’s assistance with the December stimulus package, which will be distributed to the states and distributed as they see fit. Once carved up, this may only help a small portion of renters for a temporary fix.
In 2020, SFR rents have continued to appreciate, thanks in part to the federal stimulus and squeezed inventory from eviction moratoria and tenants re-signing leases. Rental affordability is still reasonable in most areas of Jacksonville. SFR rentals will continue to have a demand advantage over multifamily
as families relocate from cramped multifamily structures.
Increased evictions will add to vacancies and reduce overall demand. Depending how quickly the courts can process evictions, this could add a significant amount of vacant rental inventory in a short amount of time. Once the eviction moratorium ends, a new challenge will be the reduced pool of “qualified” renters without eviction or recent job loss. Landlords may have to lower their requirements, and reduce prices to fill vacancies.
2021 SFR Rent Price Forecast: 0 percent to +3 percent
Jacksonville is still affordable for renters and buyers, and offers many positive signals of future performance including: job growth and wage increases, low cost of living, favorable tax environment, beaches, parks, good weather, and the location has much lower hurricane risk than many other areas in Florida. Jacksonville is a major transportation & shipping hub, which will only continue to grow with consumers shifting towards e-commerce delivery.
Forward looking investors should plan for a deluge of inventory in 2021. The current demand in Jacksonville may absorb most of the distressed inventory and limit any downside in prices.
Owners have a record amount of equity built up, and there are now a myriad of government programs to protect borrowers and mitigate another foreclosure crisis. Once forbearance programs end, we expect home prices to flatten or moderately drop with the increase in inventory. The largest concern for home prices may be 2+ years away, when the FED begins to raise interest rates again.
Even if there is a moderate pullback in home prices over the next few years, we don’t foresee a large crash occurring.
Bottom line, Jacksonville is a steadily growing market with a resilient and diverse economy, which will bounce back after the pandemic abates. Due to the higher-than-average crime rate, it is important to conduct thorough research and consult with local experts to find safe and desirable neighborhoods to invest in.
Bio: Fred Heigold III is the senior data analyst at Altisource® / RentRange®, an industry leader in market data and analytics for the single-family rental housing industry.