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Investor Insight: Factors Thwarting Jacksonville Real Estate Crash

Despite the sensationalism prevalent in the media, the reality of a real estate market crash in Jacksonville, Florida seems remote. For those swayed by such headlines, it’s worth noting that real estate values rarely take a downward trajectory.

Historically speaking, Jacksonville home values have seen an annual decline only once since 1982, during the Great Recession, as per research by John Burns Research and Consulting (JBREC). Even in that instance, rental rates held their ground. The persistent talk of a real estate downfall is more media hype than fact.

A closer look at the data

Contradicting the media’s gloomy predictions, several indicators posit a promising outlook for Jacksonville’s real estate market. Our analysis reveals a robust and flourishing market in Jacksonville.

Inventory levels running low

A vital component buttressing Jacksonville’s real estate market is the scarcity of inventory. The present months of inventory (MOI) metric — indicating the duration it would take to sell all homes currently on the market at the current sales pace — underscores this deficiency.

As per the MOI, Jacksonville is grappling with a significant shortage of inventory. With one of the highest population growth rates in the U.S., the demand for housing is skyrocketing. This mix of sparse supply and high demand sets a sturdy baseline for short-term pricing and offers considerable potential for future growth.

Accelerated population growth

The rapid expansion of the population also buttresses Jacksonville’s real estate market. As per U.S. Census data, Jacksonville ranks fifth among the fastest-growing Metropolitan Statistical Areas in the nation, boasting a growth rate of 3.6% between 2017-2019, in contrast to the 1% growth rate for the entire U.S.

This surge has ramped up housing demand, thus ensuring strong pricing for rents and home prices in the short term and potentially above-average growth over an entire market cycle. The trend of population growth is projected to continue in the years to come, thereby intensifying the housing demand in Jacksonville and propelling the city’s real estate market further.

Robust job market

The vibrant job market in Jacksonville acts as another pillar of support for the local economy and the real estate market. The city is home to four Fortune 500 companies — Fidelity National Information Services, CSX Corporation, Fidelity National Financial, and Landstar System Inc. Additionally, several other companies, including Dun & Bradstreet and Paycor, have recently set up base in Jacksonville. With Amazon, the city’s largest private employer, providing over 12,000 jobs across its 12 centers, these significant employers boost the local economy, which in turn spurs the real estate market by elevating housing demand.

Substantial equity levels in existing homes

The considerable equity homeowners in Jacksonville hold adds further stability to the city’s real estate market. In contrast to the Great Recession, when an upsurge in foreclosure activity occurred due to homeowners being unable to sell their underwater homes, today’s homeowners hold an extraordinary amount of home equity.

Should a recession lead to job loss, homeowners can opt to sell their properties before undergoing the foreclosure process. This could temper any potential foreclosure activity during economic downturns, ensuring a more stable housing market. The substantial equity that Jacksonville homeowners possess strengthens the city’s real estate market, further validating the improbability of a real estate crash in the foreseeable future.

Investment recommendations

Given the positive market indicators — low inventory levels, rapid population growth, a robust job market, and substantial homeowner equity — Jacksonville’s real estate market appears to be in good health. Instead of worrying about the real estate market, attention should be directed towards the stock market’s performance during a recession. Post WWII, the S&P 500 has lost an average of 29% during all recessions, according to The Motley Fool.

Interestingly, in five of the last six recessions, Jacksonville’s home prices have actually appreciated in value. This makes real estate a reliable and promising avenue for investors, allowing them to benefit from a stable and burgeoning market.

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