Delaware Real Estate Market Trends & Analysis


The Delaware real estate market appears content sticking close to national averages for most of today's prominent indicators. If for nothing else, real estate in Delaware is riding the same tailwinds as the rest of the country. The onset of the pandemic at the beginning of last year set off a unique chain of events that has culminated in a hot housing market. In particular, lower interest rates, better unemployment numbers, the reopening of the economy, improving sentiment, and a lack of inventory have facilitated a historic level of demand. Not unlike everywhere else, demand in the Delaware housing market has resulted in heated competition and shaped the way investors must operate. Whereas the Delaware real estate investing community used to prioritize flips and rehabs, investors are now finding long-term exit strategies more viable; keep reading to find out why.

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:

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: $317,985

  • 1-Year Appreciation Rate: +16.5%

  • Median Sales Price: $326,500 (+11.0% year over year)

  • Units Sold: 1,681 (-5.0% year over year)

  • Days On Market: 19 (-67.0% year over year)

  • Active Inventory: 1,969 (-34.0% year over year)

  • Months Of Supply: 1.2 (-31.0% year over year(

  • New Listings: 1,968 (+8.0% year over year)

  • Median Rent Price: $1,634 (+17.1% year over year)

  • Price-To-Rent Ratio: 16.21

  • Unemployment Rate: 5.4% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 973,764 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $68,287 (latest estimate by the U.S. Census Bureau)

  • Total Foreclosure Filings (first six months of 2021): 449 (0.1% of housing units)

Delaware Median Home Prices


Like the rest of the country, the Delaware real estate market has seen its prices rise almost exponentially for the better part of a decade. For nine years, confidence in the housing sector and an expanding economy drove prices higher regularly. In that time, the median home value in Delaware has increased as much as 47.9%. Still, the real story has more to do with what has transpired since the first quarter of 2020. Since the introduction of the Coronavirus, the state's median home value increased approximately 20.9%.

Increases in the last year are primarily the result of indicators created in the wake of COVID-19. In particular, the housing market has a healthy level of demand. More people are looking to buy because of historically low interest rates, increased savings from more than a year of staying home, and historical appreciation. More people are ready and willing to buy in Delaware than in recent history, which has drastically increased demand. That said, demand has outpaced supply for way too long. With a mere 1.2 months of available inventory, Delaware is far from a balanced market, with indicators heavily favoring sellers. As a result, sellers have increased their asking prices accordingly. In many cases, sellers don't even need to ask for more; competition drives up prices on its own.

More importantly, price increases will likely continue for the foreseeable future. As long as inventory remains as low as it is and demand remains high, prices will keep increasing, albeit at a slower pace. Fortunately, homebuilders are back to work and are starting to address the issue, but relief is far away. Homes are being built, but the vast majority of them are years out. Till then, it's safe to assume values will keep rising.

To be clear, many of the same indicators present in Delaware mimic those of the national real estate market. The current state of the Delaware housing market is directly correlated to a simultaneous increase in demand and a decrease in available inventory; there aren’t enough homes to satiate the sheer volume of buyers. As a result, sellers have been able to increase prices accordingly.

Delaware Median Rent Prices


Delaware’s home prices impact the entire housing sector, and rental rates are subject to drastic changes in valuation. The last 12 months of home value increases have enabled landlords to increase their asking prices as well. If for nothing else, higher home values and a lack of listings prevent a large population of prospective buyers from participating in the market. As a result, many people want to buy but can’t, which lends itself to another issue: the same supply and demand crisis facing would-be buyers is impacting renters.

Since more people are priced out of the buying market, we see more renters than average competing over fewer available properties. Landlords have found themselves in a position of power in Delaware, and their asking prices reflect as much.

According to the latest data released by Apartment List, the median rent in Delaware has increased 17.1% in the last year and now sits around $1,634. The latest increase in rents is almost in line with home values, albeit slightly higher. Here's a better idea of what renters can expect to pay in the Delaware real estate market:

  • Studio: $1,250

  • 1-Bedroom: $1,304

  • 2-Bedroom: $1,611

  • 3-Bedroom: $1,917

  • 4-Bedroom: $2,149


Comparatively, the national average rent price is about $1,219, or 34.0% lower than Delaware's. The difference is noticeable, but all indicators suggest national averages will make up some ground on the Delaware housing market. All things considered, now looks like an excellent time to become a landlord.

Delaware Foreclosure Trends & Statistics


According to ATTOM Data Solutions’ Midyear 2021 U.S. Foreclosure Market Report, a total of 65,082 U.S. properties received a foreclosure filing (default notices, scheduled auctions, or bank repossessions) in the first six months of the year. “That figure is down 61 percent from the same time period a year ago and down 78 percent from the same time period two years ago,” according to the report.

Foreclosures are down across the country, but not because fewer homeowners are in financial distress. In fact, unemployment still remains an issue and an increase in foreclosure filings seems imminent. If for nothing else, the main reason foreclosures are down is because of government intervention over the course of the pandemic. In order to prevent an influx of defaults, the government prevented banks from foreclosing on delinquent homeowners. As a result, many homeowners were allowed to stay in their homes over the last year, despite the inability to pay their mortgages.

The moratoriums clearly impacted the Delaware real estate market, as foreclosure filings are down about 62.2% over the first six months of 2021 from the same point in the previous year. In all, Delaware saw a total of 449 properties file for foreclosure from January to June. At that rate, 0.10% of the state's housing units are considered distressed. While that may not sound like much, Delaware has the highest foreclosure rate in the country.

According to ATTOM Data Solutions, "states with the highest foreclosure rates in the first half of 2021 were Delaware (0.10 percent of housing units with a foreclosure filing); Illinois (0.09 percent); Florida (0.08 percent); Ohio (0.08 percent); and Indiana (0.08 percent)."

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. That said, it's safe to assume the state's foreclosure rate will increase sooner rather than later. While it's too soon to tell how much foreclosures will increase, the expiration of government foreclosure assistance programs will impact many homeowners. Those who can't come current with their mortgage obligations will likely need to file foreclosure; if that's the case, the Delaware real estate inviting community needs to line up funding immediately. Doing so will enable real estate investors in Delaware to simultaneously help distressed homeowners avoid tough financial situations and find subsequent deals.

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


The Delaware real estate market has seen almost all of its significant indicators change because of the Coronavirus, and home values are no exception. As a result, the Delaware real estate investing community has shifted its exit strategies to align with new metrics. In particular, real estate investors appear more inclined to lean towards long-term rental properties because the profit margins on flips aren't what they used to be.

According to ATTOM Data Solutions' second-quarter 2021 U.S. Home Sales Report, "the typical single-family home and condo sale across the United States during the second quarter of 2021 generated a profit of $94,500. That was up from $90,000 in the first quarter of 2021 and $60,572 in the second quarter of 2020."

There's no doubt that home prices are becoming more prohibitive to rehabbers with each passing month. That's why, in addition to rehabbing, many investors in Delaware are looking for long-term investments like rental properties.

In addition to shrinking profit margins, the Fed's decision to lower interest rates last year (and keep them low) has promoted long-term exit strategies in recent history. Historically low interest rates have already helped the Delaware real estate investing community offset higher acquisition costs, and they will continue to do so. As recently as August, the average commitment rate on a 30-year fixed-rate loan was 2.84%. While up slightly year to date, today's rate is low and represents an excellent opportunity for Delaware investors to increase cash flow and justify higher prices simultaneously. At the very least, the less money rental property owners have to pay towards their mortgage each month, the more they can pocket from incoming rent.

In addition to lower borrowing costs, Delaware's price-to-rent ratio is 16.21. At that level, it's more affordable to rent in Delaware than to own real estate. The state's price-to-rent ratio will drive more people to become renters; houses are too expensive for many to even consider buying. The lack of affordability driving people to rent will increase demand, and landlords will be able to increase asking rates and mitigate the risk of vacancy.

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 too many variables to account for to predict any housing market with the utmost certainty. Nonetheless, it is good practice to make decisions based on well-informed, educated opinions about 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 increase: Despite the latest decrease in foreclosure filings, the Delaware real estate market boasts the highest foreclosure rate in the country. Additionally, there's no reason to suggest foreclosures won't increase soon. With a relatively high unemployment rate and moratorium programs expected to expire, Delaware could see an influx of foreclosures shortly.

  • 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. With just over a month of inventory, real estate in Delaware has a long way to go until it's considered a balanced, healthy market.

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:



https://www.zillow.com/de/home-values/
https://www.zillow.com/home-values/
https://www.bls.gov/eag/eag.de.htm
https://www.bls.gov/news.release/pdf/empsit.pdf
https://delawarerealtor.com/buyers-and-sellers/monthly-housing-statistics/
https://marketminute.longandfoster.com/Market-Minute/DE/Delaware.htm
https://www.apartmentlist.com/research/category/data-rent-estimates
https://www.census.gov/quickfacts/DE
http://www.freddiemac.com/pmms/pmms30.html
https://www.attomdata.com/news/most-recent/attom-mid-year-2021-u-s-foreclosure-market-report/

*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no representations, warranties, or guarantees, either expressed or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. FortuneBuilders Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.