Delaware Real Estate Market Trends & Analysis

The Delaware real estate market has yet to experience the same level of recovery as the rest of the country. The loss of equity experienced in Delaware from 2008 to 2012 has proven to be more of an obstacle than many people anticipated. As a result, the local economy has had a difficult time alleviating its own foreclosure crisis. Despite foreclosure activity decreasing on a national level, the Delaware real estate market clocked in with the second highest foreclosure rate of all the states in the first six months of 2019.

It is worth noting, however, that while Delaware may have a high foreclosure rate, foreclosure activity is down year-over-year. Slight improvements in the local economy have helped many homeowners regain equity, but there is still a lot of ground to make up. That said, opportunistic investors may be able to lend a helping hand. By tapping into Delaware’s foreclosure market, investors may simultaneously acquire deals at a discount while helping distressed property owners.

The Top Delaware Real Estate Markets

While the best real estate market in Delaware is up for debate, here’s a list of the cities investors may want to pay special considerations to:

• Dover

• Newark

• Wilmington

Delaware Real Estate Fees & Regulations

Real Estate

Closing Conducted by:	Attorneys
Conveyance:	Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method:	Judicial
Process Period:	3 - 7 months
Notice of Sale:	Sheriff
Redemption Period:	None

Taxes

Income Tax:	2.2% - 6.60%
Corporate Tax:	8.70%
Sales Tax:	None
Estate Tax:	No
Inheritance Tax:	No
Median Property Tax:	0.43%
Property Taxes by County:	http://www.tax-rates.org/delaware/property-tax#Counties

Average Transactional Costs

Closing Cost:	$2,516
Transfer Fee:	1.5% - 2%
Origination Fee:	$1,771.00

Delaware Housing Market Overview

• Median Home Value: $236,400

• 1-Year Appreciation Rate: +1.2%

• Median Home Value (1-Year Forecast): +0.4%

• Median Rent Price: $1,400

• Price-To-Rent Ratio: 14.07

• Average Days On Market: 76

• Percent With Negative Equity: 10.8%

• Unemployment Rate: 3.3% (latest estimate by the Bureau Of Labor Statistics)

• Population: 967,171 (latest estimate by the U.S. Census Bureau)

• Median Household Income: $63,036 (latest estimate by the U.S. Census Bureau)

• Percentage Of Vacant Homes: 16.85%

• Foreclosure Rate: 1 in every 1,106

Delaware Median Home Prices

At $236,400, the median home value in Delaware has returned to (and even exceeded) its pre-recession level. Since the beginning of The Great Recession, however, the Delaware real estate market has experienced significant variances. As recently as 2012, real estate in Delaware bottomed out around $184,000. Since then (October 2012), home values in Delaware have increased 28.4%. Median home values across the United States, on the other hand, increased 51.9% over the same period of time.

The exponential increase in Delaware’s home values over the last seven years is largely attributed to improving economic conditions and a distinct lack of available housing. In other words, the fundamental principle of supply and demand has served to increase prices since 2012. More people are better positioned to buy homes today, but there simply aren’t enough available properties to satiate demand. According to Long And Foster, "the total number of active inventory this September was 4,912 compared to 6,301 in September 2018.” Today’s available inventory translates to about 3.9 months of supply, which is about half of what a healthy market would like to see. As a result, it is safe to assume prices will continue to increase for the foreseeable future, albeit at a slower pace.

That’s not to say the market is slowing down, but rather suggesting a return to normalcy. Homes have appreciated at such a fast rate that there simply isn’t much more room for growth. Instead, Delaware residents should see appreciation rates more in line with traditional norms.

Delaware Median Rent Prices

Not unlike every other market across the country, rental prices in the Delaware real estate market share a direct correlation with home values. For the better part of a decade, in fact, rental prices have increased with their home value counterparts. While home values have increased 28.4% in Delaware since October 2012, rent prices have increased a more modest 10.4%. As a result, the median rent price in Delaware is now $1,400, according to Zillow’s Home Value Index. At that price point, the local market boasts an average price-to-rent ratio of 14.07, which suggests it is currently more affordable to rent in Delaware than to own.

To put things into perspective, the median rent price in the United States is $1,700. Subsequently, renting real estate in Delaware is generally more affordable than the majority of the United States.

Delaware Foreclosure Trends & Statistics

According to RealtyTrac, a nationally recognized real estate information company that specializes in distressed properties, Delaware has one of the highest distributions of distressed properties in the country. With approximately one out of every 1,170 homes in some stage of distress (default, auction or bank owned), Delaware boasts a foreclosure rate of about 8.5%. The country as a whole, on the other hand, has a foreclosure rate of 3.9%. Only New Jersey, for that matter, had a higher foreclosure rate than Delaware over the first six months of 2019—0.54% and 0.46%. respectively. “Nationwide 0.22 percent of all housing units (one in every 457) had a foreclosure filing in the first six months of 2019,” according to Attom Data Solutions’ latest Foreclosure Market Report.

It is worth noting, however, that the latest Delaware real estate trends suggest there’s reason for encouragement. While Delaware’s foreclosure rate is high, it is on the mend. Over the course of the last year, in particular, Delaware has made great strides to improve its distressed property rate. “In September, the number of properties that received a foreclosure filing in DE was 5% lower than the previous month and 26% lower than the same time last year,” according to RealtyTrac.

Recent improvements may be attributed to a strengthening economy. Not unlike the rest of the country, the entire state of Delaware has benefitted from improving economic conditions, as modest as they may be. There’s no doubt about it: nearly every economic indicator is better off today than even a few short years ago. As a result, fewer homeowners have found themselves underwater. Nonetheless, the state still faces a dire foreclosure problem. There are still pockets of distressed homes with higher distributions of foreclosed properties, not the least of which include the following counties:

• Kent (1 in every 808)

• New Castle (1 in every 1,028)

• Sussex (1 in every 2,180)

While Delaware has one of the highest foreclosure rates in the country, it also has one of the lowest state populations. Despite high rates, Delaware still has fewer foreclosures than many states across the country—it’s all relative.

Tax Lien Investing

• Tax Lien or Deed: Tax Deed State

• Interest Rate: 15-20% penalty (in some counties)

• Redemption Period: 1 Year Redemption (in some counties)

Delaware Real Estate Investing

Much like any savvy real estate investor would, Delaware real estate investors place an emphasis on distressed assets over those in a more traditional position. If for nothing else, paying special consideration to the properties of motivated sellers increases the odds of landing a deal with attractive profit margins. Having said that, there’s one type of distressed real estate asset investors in Delaware should prioritize over all others: pre-foreclosures. Making up 57.2% of Delaware’s distressed homes, pre-foreclosures are far and away the most common distressed property types.

As their names suggest, pre-foreclosures are the assists of homeowners who have fallen behind in payments. Their inability to keep up with mortgage obligations have placed their homes at risk of falling into foreclosure. Consequently, pre-foreclosures aren’t in foreclosure, but rather at risk of it. Nonetheless, homeowners behind on payments may be more motivated to sell their homes—that, or face falling into foreclosure at a later date. Therein lies the real reason investing in Delaware real estate remains so attractive: the state’s high distribution of distressed homes suggests more homeowners will be motivated to sell. You see, those behind on payments are better off selling to investors than losing their properties to foreclosure.

Delaware real estate investors will want to focus marketing efforts on homeowners who have missed at least a few payments. In order to do so, they should take a trip to the local courthouse, where the information they are looking for is made available to the public. A deliberate trip through courthouse records will reveal exactly who is behind on payments. From there, investors may formulate a marketing strategy to contact the owners of said homes. It is worth noting, however, that not everyone in pre-foreclosure is willing to sell for a discount (if at all), but their current status bodes well for savvy investors.

Of course, knowing where to find real estate deals in Delaware is only going to take investors so far. Deals need to follow an exit strategy, which begs the question: What should investors do with the properties once they acquire them? Which exit strategies does the Delaware real estate market cater to the most?

The Delaware real estate market’s underlying fundamentals appear to support the three most popular exit strategies: wholesaling, rehabbing and renting. It is worth noting, however, that buy-and-hold strategies appear to have the upper hand. While the median home value in Delaware is slightly higher than the national average, the state’s median rent prices are actually considerably lower than the country as a whole. Consequently, it is relatively cheaper to rent in Delaware compared to the rest of the country. As a result, demand for rental units may provide a slight advantage for buy-and-hold real estate investors. That’s not to say there isn’t plenty of potential in the wholesale and rehab markets, but rather that current prices and demand for renting lean heavily in favor of landlords.

Delaware Housing Market Predictions

Predicting Delaware real estate trends coincides with an inherent degree of error. Regardless of how stable any market seems, there are simply too many variables to account for to predict any housing market with the utmost certainty. Nonetheless, it is good practice to make decisions based off of well-informed, educated guesses pertaining to a respective housing market. Keeping a finger on the pulse of the market can help Delaware real estate investors interpret the most lily direction things are heading. Let’s take a look at the Delaware real estate predictions that are most likely to come to fruition in the next year or so:

• Foreclosure activity will continue to decline: As it has already done over the course of 12 months, the strengthening economy has bolstered the Delaware real estate market. Consequently, increasing home values have removed many homeowners from underwater, precarious situations. While there’s still an inordinate amount of foreclosures in the Delaware housing market, the state looks like it will slowly (but surely) ease foreclosure activity for the foreseeable future. What’s more, investing in Delaware foreclosures should promote a healthier market for everyone.

• Available inventory will continue driving prices up: The Delaware real estate market has felt the constraints of tight inventory for several years. Thanks, in large part, to a lack of available housing, prices have increased for the better part of a decade. That said, there doesn’t appear to be a solution anywhere on the horizon. As of September, Delaware had 3.9 months of supply, which represents a year-over-year decline of 25%. Until the state addresses the situation, home prices will continue to rise.

• Positive economic indicators will support a healthy real estate market: Not unlike the majority of markets across the country, Delaware is a lot better off today than it has been in years past; that, combined with a stronger economy and historically low interest rates should promote homeownership on a higher scale. As a result, the entire market should see a lot more activity, which bodes well for everyone involved in transactions for the foreseeable future.

Summary

The Delaware real estate market has experienced a few more setbacks in the last ten years than the country as a whole, but the state is nonetheless on the mend. Real estate activity is on the rise, economic indicators are improving, and overall sentiment is improving. That said, foreclosures still remain a hurdle preventing the local housing market from realizing its full potential. Therefore, the recent decline in distressed properties can’t be ignored. If real estate in Delaware can continue to reduce foreclosure starts and increase available inventory, there’s a good chance it may realize its true potential sooner rather than later. When that finally does happen, everyone will be glad the participated in the Delaware real estate market: buyers, sellers, renters and investors.

Sources:

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https://www.census.gov/quickfacts/DE
https://www.bls.gov/regions/mid-atlantic/delaware.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/de/
https://www.realtytrac.com/statsandtrends/de/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/de/home-values/
https://www.zillow.com/home-values/
https://www.attomdata.com/news/market-trends/mid-year-q2-2019-foreclosure-market-report/
http://marketminute.longandfoster.com/Market-Minute/DE/Delaware.htm