Sullivan, Washington investment properties decline, vacancy rates and rents up


The number of Sullivan and Washington investor-owned single-family and townhome properties has declined for the third straight year, and the vacancy rate has increased. That gauge of the local rental market was gleaned from Attom Data Solutions most recent Vacant Property and Zombie Foreclosure Report.

Don’t worry about the Zombies. None were seen in the current analysis of local markets. In real estate, a zombie property is one where the title remains with the owner after the mortgage lender has begun foreclosure. Attom’s current analysis study 41 Sullivan and Washington counties in the foreclosure process.

Vacancy rates don’t create a headline nearly as sexy as the local zombie status. But the story they tell can be as much a look forward as much as a look at what has happened in the housing market.

Attom’s report shows there are almost 3,000 vacant single-family and townhomes in the only two local counties analyzed in the report. That’s a 2.1% vacancy rate. Nationwide the rate is 1.2%.  How does the number of vacancies compare to the number listed for sales? In mid-July, there were a little over 2,300 active listings for properties in the Sullivan-Washington area listed for sale.

Shift the focus to investor-owned properties. Attom’s analysis says there’re 48,455 of them in Sullivan and Washington counties and 2,316 of them are vacant – a 4.8% vacancy rate.

Investor’s role in the housing recovery

If you use county existing home sales as metric for recovery from the Great Recession, about 30% of the local recovery came from all-cash sales and most those were from investors. Some of those purchases were to flippers who turned those homes back to the market after some rehab or remodeling. It was and continues to be an important element in a housing market where the new home industry did not and continues to underperform pre-recession levels and falls short of current demand.

Sullivan rents increase faster than U.S. avg.

The current investment surge has been largely driven by a purchase-and-rent strategy. A rent affordability report by Attom shows that the rent on a three-bedroom home in Sullivan was up 4.8% from last year while it increased by 2.5% in Washington County. That analysis said rents in those two counties were increasing faster than home prices.  A separate CoreLogic study found rents nationwide increased by 3.2%. And a Freddie Mac report put the current single-family tenant retention rate was at 70% compared to the 50%-53% rate for multi-family apartments.

Rents increases since 2008

Rentals are also a good investment when you compare current levels to the 2008 pre-recession fair market rents.

Here’s how that rental comparison looks:

Sullivan:

  • 1-bedroom, up 24%.
  • 2-bedroom, up 32%.
  • 3-bedroom, up 29%.

Washington:

  • 1-bedroom, up 25%.
  • 2-bedroom, up 26%.
  • 3-bedroom, up 27%.

Given those conditions, you would think the number of investment properties would be on the upswing. But that’s not the case.  The decline in the number of investment properties has been highest in Sullivan County. The number dropped by about 1,500 properties in each of the most current two years. Washington County’s decline has been in the range of 600 to 751 properties in each of the past three years.

The investment property vacancy rate in Sullivan has increased from 3.5% when there were 31,099 properties to 5.3% in the current report when there were 28,524 properties.

Washington County’s vacancy rate hasn’t been as steep or as volatile as its neighbor to the north. The current rate is 4% of almost 20,000 properties from 3.1% of a little over 22,000 properties.

Do the numbers point to an investor slow down?

Connie Grandelli, a Century 21 agent who also uses her background in investing to moderate a local meet-up group for local real estate investors, thinks the local investor market for single-family homes is still very strong. “Our area has a good inventory of distressed properties. Some investors say they can’t find properties with wide enough margins to flip, but I think this may be due to some unrealistic expectations for extremely high returns.”

High returns have been a staple for reports on average gross profits for local flips.

“Condos are more problematic for investors and homeowners alike,” she added. “For investors, they can buy and rehab the property.” It’s a little bit trickier on the selling side.  “Conventional financing is about the only type of financing available for condos, although FHA is starting to come around.” Her comments were made before new rules for condo financing were announced by the FHA.

Grandelli also doesn’t think the number of new multi-family complexes in the area has dampened the single-family or condo rental market. “From my perspective as a Realtor, certain people prefer apartments, and others prefer single-family housing. It’s a matter of preference versus availability.”

The big question is, how long will investors keep it up?

Attom’s methodology for vacancy-zombie analysis

Attom analyzed county tax assessor data for more than 98 million single-family homes and condos for vacancy, broken down by foreclosure status and, owner-occupancy status. Only counties with at least 50,000 single-family homes and condos were included in the analysis

 



Categories: REAL ESTATE

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