Ocala Real Estate Predictions for 2021, Part 2
After the unpredictable world, overall, in 2020, it’s natural to wonder what will happen in 2021—and, to help, Clay Lehman, president and founder of Resolute Property Management, offers his insights on Ocala real estate trends and predictions.
Here is a high-level comment: “I see low inventory and high buyer demand, which in turn has led to an increase in home prices and a whole lot of frenzy in the market.”
Clay then broke down his predictions into two categories: demand and supply. Here are his thoughts on Ocala real estate demand from a recent post. Highlights include:
- Increased employment in Ocala is driving demand and this should continue.
- Many of these jobs pay wages that indicate that employees will rent rather than buy.
- Remote work, which is increasing, allows more people to live where they’d like—and Florida is an in-demand spot.
- Low interest rates are also driving demand, and this is also likely to continue.
Now, here are supply-side predictions.
Real Estate Supply in Marion County
“In general,” Clay says, “supply comes from a handful of sources. It can come from existing homes that owners decide to list. But, unless they’re moving out of the area, they still need somewhere to live and may buy another home in the area. In that case, supply has not been increased. Someone may sell a second home and not buy a new one. In that situation, supply was loosened up by that home. Or supply can increase through new home construction. Yet another source of real estate supply comes from foreclosures/defaults, plus short sales and distressed home sales.”
Despite these sources of supply, it’s currently not enough to keep up with the present demand. The question then becomes, “Why?”
Well, in 2006, when demand was also high, new home construction was more or less keeping up with the numbers of new families coming into the area—doing so through the construction of multiple large-scale developments. In 2020, that simply isn’t the case.
“There is some demand being met through construction,” Clay says, “usually to meet the demands of a first-time home buyer, maybe by a $150,000 home. Most new communities being built, though, have homes being priced at $200,000 or more, so there is a supply gap that isn’t currently being met.”
As far as defaults and foreclosures, what many people anticipated would happen in 2020 because of COVID—didn’t. Many people, including some experts, predicted that unemployment would rise, people would stop paying their mortgages, and an increase of defaults and foreclosures would occur. It was expected that there would be 2008 levels of pullback on home prices, as well. Although some defaults and foreclosures took place, they always do—and, during 2020, not much out of the ordinary happened.
“Yes,” Clay says, “defaults increased. But because people were offered forbearance, there wasn’t a price pullback. In fact, prices are up by twelve percent from last year in Marion County. This means that, for many to most people in default, they have enough equity to sell their homes. Compare that to 2008 through 2012, when people owed more than their homes were worth, and you can see why there isn’t a looming wave of foreclosures now.”
Ocala Real Estate Demand Versus Supply
To give context, when prices are steady, it’s normal to have 5.5 months of inventory (supply). In other words, even if another home was not listed during that time, it would take five and a half months to sell them all. Right now, in Ocala, we’re at 2.2 months, meaning it’s a heavily weighted seller’s market with increasing prices.
“So, it would take 3.3 months’ worth of supply just to get us back in balance,” Clay clarifies. “I predict that, going into 2021, the most that will happen with pricing is that appreciation slows down or levels off. I don’t anticipate a full-blow reversal or any kind of real estate crisis.”
Tips for Ocala Investors
This can feel like a challenging time as an investor, but these can be overcome. Clay offers the following strategies:
- Be disciplined and operate without emotion as you make investment decisions.
- If you can buy with cash, look for distressed properties that you can buy without financing and also do the repairs with cash.
- New construction remains an opportunity. It will just take some patience because this is a six-month process or more.
“The market is great if you can borrow at 2.5 percent,” he adds, “because you can get mortgage payments that allow for cash flow. Expect to pay a price that won’t leave as much room for future appreciation as you might like.”
Overall Ocala real estate prediction: Smooth sailing going in 2021, but you’ll need to find the right inventory.
How Resolute Property Management Can Help
To discuss Ocala real estate supply in 2021, you can schedule a 15-minute call today. Our Ocala property management company loves to help investors, so we carefully monitor real estate trends and provide valuable insights. Let’s talk!