Coming into 2019, the big question for Marion County property investors has been inventory. Where is the inventory? For the last few years, home buyers have become increasingly frustrated with the challenge of finding a house. Further, the lack of inventory puts upward pressure on pricing. Will an influx of new inventory to the market, should it materialize, lead to slowing price increases or even reductions in home values? Or will demand in Ocala and the surround area continue to outstrip supply?
In January, Marion County inventory of real estate on the market and available for sale increased by 6.8%, compared to last year. This is the 6th straight month of year-over-year increases. So inventory is returning to the market. The next question is will the market absorb this inventory or will this increase in inventory lead to longer days on market, price reductions and a shift to a buyers market?
So far, the increase in available units does not appear to be impacting the market negatively. The first measure I look at to determine the status of the market is the months supply of inventory, or how many months would it take to sell all the inventory currently available. The number is at 4.7 months inventory, which is 4.1% lower than last year. So while the inventory numbers are going up, the number of sold homes is also increasing.
One of the most watched numbers in any real estate market is obviously median sale price. Median sale price is a better measure than average sale price because your average sale price can be influenced by a small number of homes that do not reflect the overall market (like if a $100 million dollar home sold in an area that does not have a lot of $100 million, the average sale price will skew upward). Median home price increased 11.0% year over year to $159,900. This is down slightly from December, but month-to-month changes are not generally as reliable an indicator as year-over-year due to market seasonality.
That is the good news. And there really isn’t any bad news, but there are some things to keep an eye on. The following are the numbers I think of as leading indicators of where we are headed. First is the median time to sale or how long does a property sit on the market until it closes. This number is up 2.2%, to 94 days. As homes take longer to sell, sellers get antsy and start reducing their asking price, which in turn leads to a decrease in home values. I don’t know how long this will take and I am not advocating taking a short position of the Marion County market (in fact, I believe Marion County has way too many positives when it comes to real estate investing to take a short position) but it is something to monitor.
The next indicator is related to median time to sale and that’s the % of original list price received, or how close was the sale price to the list price. The number went down to 95.5% (still a strong number) from 96% last year. As with the previous stat, this decrease is not a ringing alarm. In fact, it is the first decline in this number in the last 40 months (going back to January of 2015, which is as far back as the reports I am using are available). While that is incredible and of note, we will need to watch the next few months to see if it is an anomaly or as sign of things to come.
What does this mean for investors? It has been very hard for investors to find deals that cash flow for a while now. These numbers indicate this will still be the case for the foreseeable future. As all successful long-term investors know, there are always deals; they can just become harder to find. It is also important not to let your desire to keep closing deals outweigh your discipline and your numbers. Always listen to your numbers.