The Mississippi real estate market is in the same position as every other state in the country: prices continue to test all-time highs in the wake of historic competition, relatively low interest rates, and pent-up demand. In short, the pandemic has created an environment where demand greatly outweighs supply. Today's prices are appreciating at a near exponential pace, which begs the question: Is Mississippi a good place to invest in real estate? To be clear, Mississippi is a great place to invest in real estate; investors just need to mind due diligence.
The Top Mississippi Real Estate Markets
While the best real estate market in Mississippi is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Unemployment Rate: 4.2% (latest estimate by the Bureau Of Labor Statistics)
Population: 2,949,965 (latest estimate by the U.S. Census Bureau)
Median Household Income: $46,511 (latest estimate by the U.S. Census Bureau)
Foreclosure Rate: One in every 10,021 homes
Mississippi Median Home Prices
The median home value in Mississippi was $129,000 as recently as March 2020, otherwise known as the start of the pandemic. At the time, Mississippi home values were riding eight consecutive years of gains. Today, the median home value has increased 24.9% in the new landscape created by COVID-19. Following more than 24 months of supply and demand constraints, the median home value in Mississippi is now $161,162.
To put things into perspective, the median home value in the United States rests somewhere in the neighborhood of $344,141. In the two years following the onset of COVID-19, national home values have increased an average of 36%. As a result, national home values have outpaced local home values in the Mississippi real estate market.
Looking forward, it appears as if Mississippi real estate will continue appreciating at a rapid rate. The Fed's decision to increase interest rates will weigh on mortgage applications. Rates are still relatively low, so competition will persist, but not at the rate of the last few years. Therefore, it's safe to assume prices will increase, but at a slower rate than in the last 12 months.
Mississippi Median Rent Prices
Mississippi's rapid increase in home values has spilled over into the rental market. The latest bout of appreciation has priced many buyers out of the market. Even those who can afford to buy at today's prices may not be able to beat out the competition. As a result, more and more people are being forced to rent in the Mississippi real estate market.
The added attention on the Mississippi rental market has increased rental rates over the last 12 months. Today, the median rent in Mississippi is $1,006, which is being driven up by units with more than two bedrooms. Renters can expect the following rents relative to their accommodations:
For context, the national average rent price is about $1,321, or 31.3% more than the average renter pays in the Mississippi housing market. The difference is significant and may continue to widen for the foreseeable future. Despite expensive rents everywhere, landlords will be able to justify rent increases as long as inventory is tight. If that's the case, the Mississippi real estate investing community still has time to get into the long-term rental space.
Mississippi Foreclosure Trends & Statistics
According to ATTOM Data Solutions’ February 2022 U.S. Foreclosure Market Report, 25,833 U.S. properties received a foreclosure filing (default notices, scheduled auctions, or bank repossessions) throughout February. The same report acknowledges that foreclosures are up 1.0% from the previous month and 129.0% yearly.
“February foreclosure activity looks a lot like what we can expect to see for at least the next six months – double-digit month-over-month growth and triple-digit year-over-year increases,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM company. “This isn’t an indication of economic turmoil, or of weakness in the housing market; it’s simply the gradual return to normal levels of foreclosure activity after two years of artificially low numbers due to government and industry efforts to protect financially impacted homeowners from defaulting.”
Foreclosures are rising in every state, including the Mississippi housing market. Halfway through the first quarter of this year, there were 132 foreclosures in a market consisting of 1,322,808 housing units. At that rate, one in every 10,021 homes was considered distressed in the Mississippi real estate market. Investors interested in the distressed property market should pay special consideration to the Mississippi counties with the most foreclosures per housing unit:
Tax Lien Investing
Tax Lien or Deed: Tax Lien State
Interest Rate:18% (=1.5% per month)
Redemption Period:2 Years
Mississippi Real Estate Investing
Not unlike every other state, Mississippi has seen its investors lean in favor of distressed homes. Distressed properties traditionally award investors with more attractive profit margins. Additionally, as their names suggest, distressed homes are typically in the possession of owners who may be better off without them. In the past, foreclosures were a great way to work with motivated sellers and receive deals below market value.
However, it is worth noting that while foreclosures are on the rise, they are still historically low. Distressed inventory will continue to allow investors to rehab and flip homes, but the opportunities are growing fewer and further between. In addition to fewer foreclosures, appreciation has made profit margins shrink. Again, there are plenty of opportunities to flip homes in the Mississippi housing market, but the pandemic has shifted what looks to be the most optimal exit strategy.
Rental investments offer investors the ability to offset today’s high prices with equally impressive rental rates. Given the right property with a proper cash flow, there’s no reason to avoid homes that cost considerably more than they did one year ago. Rent checks could easily make the acquisition well worth the price in a relatively short period.
Additionally, borrowing costs are doing their best to offset today's high acquisition costs. While up year to date, interest rates are still relatively low. Lower interest rates will inherently lower monthly mortgage obligations and allow investors to increase cash flow.
Mississippi Housing Market Predictions
For the most part, the Mississippi housing market has managed to keep pace with the rest of the country. Home values, recent appreciation rates, and even forecasts predicting the next 12 months all share more similarities than not. Nonetheless, it’s always a good idea to try and translate what the current market is trying to tell people. Making educated guesses about where the Mississippi real estate market is heading could give investors the edge they need to succeed. It is entirely possible to take historical data and apply it to what may transpire in the foreseeable future. Therefore, let’s take a look at what is most likely to happen in Mississippi over the next year:
Appreciation rates in Mississippi will fall behind the national average: While only a modest difference is expected over the next 12 months, real estate in Mississippi is expected to appreciate at a slower rate than the national average. Slightly higher unemployment rates may weigh on demand and slow price growth.
Inventory will remain tight: Much like the rest of the country, Mississippi is short on available inventory; there aren’t enough homes to meet demand. Currently, the state's one month of inventory is nowhere near where it needs to be. As a result, prices have risen almost exponentially in the last two years. Help is on the horizon, but new listings will take time to hit the market. New inventory will come, whether they are new builds or existing homes, but it will not be immediate. Mississippi will see home prices rise until more can be done to bring new listings to the market.
Prices in the Mississippi real estate market may fall well behind the national average, but the state’s relative affordability has made it a hotbed of investor activity. Real estate in Mississippi is nothing less than a commodity. Investors can find affordable deals and—perhaps even more importantly—buyers for their projects. This unique combination should serve as the perfect storm for local investors. However, everyone participating in the housing market looks like they may have something to look forward to for the foreseeable future.
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