The Nebraska real estate market boasts incredible affordability. With a price-to-rent ratio leaning heavily in favor of homeownership, it is actually cheaper to buy a home in most of Nebraska than to rent one. As a result, the “Cornhusker State” has seen housing demand increase in conjunction with prices for the better part of a decade. Despite eight consecutive years of appreciation, however, the local housing market wasn't immune to the stagnation onset by the Coronavirus. Not unlike every other state across the country, Nebraska was hit hard by COVID-19 and social distancing orders which all but brought the housing market to a standstill.
There's no doubt about it: real estate in Nebraska was hit by the pandemic just as hard as everywhere else. That said, Nebraska may have a chance to lead a nationwide recovery. Housing activity is starting to come back, but Nebraska's job sector appears to have been slightly more insulated from the quarantine. Statewide unemployment didn't spike nearly as high as the national average, which means more people may be ready and willing to jump back into the housing market. The speculative activity will be helped along by government stimulus and historically interest rates, all of which bode well for the entire housing sector. Investors who play their cards right may find the later part of this year to be a great time to invest in Nebraska real estate.
The Top Nebraska Real Estate Markets
While the best real estate market in Nebraska is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Unemployment Rate: 4.0% (latest estimate by the Bureau Of Labor Statistics)
Population: 1,929,268 (latest estimate by the U.S. Census Bureau)
Median Household Income: $59,116 (latest estimate by the U.S. Census Bureau)
Percentage Of Vacant Homes: 9.70%
Foreclosure Rate: 1 in every 22,894 (0.4%)
Nebraska Median Home Prices
The median home value in Nebraska is $183,380, according to Zillow’s Home Value Index. The state’s median home value, as of the fourth quarter of 2020, is higher than it has been in more than a decade. As recently as the first quarter of 2012, in fact, the median home value in Nebraska bottomed out around $120,000 during The Great Recession. Since then, real estate in Nebraska has ridden a strong recovery. On the heels of a strengthening economy and growing optimism, the median home value in Nebraska appreciated for eight consecutive years, to the tune of 52.8%.
To put things into perspective, the median home value in the United States is $256,663—or $73,283 more than that of Nebraska’s median home value. The difference may be attributed, partially, to a slightly more aggressive appreciation rate. Since February 2012, when the national real estate market appears to have bottomed out, median home values across the whole country have jumped more than 50.0%.
Real estate in Nebraska has trailed its national counterpart for the better part of a decade, and the last year was evidence of its shortcomings. Whereas the median home value in the United States increased 5.1% over the last year (August 2019 to September 2020), the median home value in Nebraska is the beneficiary of a 4.4% jump. The difference isn’t necessarily an indictment on Nebraska real estate trends, but rather a sign that real estate across the country had more room for growth.
It is worth noting, however, that experts expect the Nebraska real estate market to make up some ground in the next year. While the median home value in the U.S. is expected to increase by 4.8% over the next 12 months, Nebraska's could increase by as much as 4.6%. For the moment, the U.S. market appears primed for more appreciation, but Nebraska is in a better place than it was last year.
Nebraska will likely make up for lost time thanks to its job market. Local unemployment spiked at 8.7% in April, which was nearly half the increase the rest of the country saw. More importantly, Nebraska's unemployment rate has nearly returned to pre-pandemic levels. As a result, more buyers are expected to enter the market in Nebraska than most other states. The added activity should drive prices up, as inventory levels have yet to be sufficient.
Nebraska Foreclosure Trends & Statistics
The Nebraska real estate market has developed a reputation for having a relatively low foreclosure rate. More specifically, however, only one in every 22,894 homes in Nebraska is considered to be in a state of foreclosure (default, auction, or bank-owned); that brings the state’s foreclosure rate to an encouraging 0.4%. Thanks—in large part—to the same factors that have facilitated the most recent bout of appreciation across the state, the foreclosure rate in Nebraska is at a level most other states aspire to be at. Consequently, the foreclosure rate across the United States is approximately 0.7%.
The Nebraska housing market has done a great job in reducing foreclosures across the state. As recently as August, in fact, “ the number of properties that received a foreclosure filing in NE was 12% lower than the previous month and 81% lower than the same time last year,” according to RealtyTrac.
Despite steady decreases in the last year, there are still several counties with higher distributions of foreclosures than others. The following counties, in fact, represent the areas with the highest distributions of distressed homes across the entire state:
Merrick (1 in every 1,261)
Cheyenne (1 in every 2,492)
Thayer (1 in every 2,715)
Polk (1 in every 2,719)
Dawes (1 in every 4,240)
While the foreclosure rate across Nebraska is relatively low, it’s important to note that the pockets of distressed homes are highly concentrated. While there may not be a lot of cities with significant numbers of distressed homes, those that are more susceptible to foreclosures have a relatively high distribution of distressed homes.
It should also be noted that foreclosure filings are expected to increase. The Coronavirus is already responsible for a lot of economic turmoil across the country, and Nebraska is no exception. It is safe to assume Nebraska will see an increase sooner or later, not unlike the national average saw recently. After years of decreases in foreclosure filings, the U.S. saw an 11.0% jump from July to August. It is too soon to tell what will happen in Nebraska, but there's a good chance foreclosures will increase for the first time in a while.
Tax Lien Investing
Tax Lien or Deed: Tax Lien State
Interest Rate: 14%
Redemption Period: 3 Years
Nebraska Real Estate Investing
Real estate investors and homeowners across the country have enjoyed several years of seller gains and attractive ROI (return on investment). According to Attom Data Solutions’ most recent Home Sales Report, in fact, the average home seller in 2019 “realized a home price gain of $65,500 on the typical sale, up from $58,100 last year and up from $50,027 two years ago.” Profits were calculated using the median purchase and resale prices and currently represent a 13-year high.
The report went on to say that profits “represented a 34 percent return on investment compared to the original purchase price, up from 31.4 percent last year and up from 27.4 percent in 2017, to the highest average home seller ROI since 2006.” Simply put, average U.S. home seller profits are higher than they have been in a really long time.
It is worth noting, however, that profits aren’t only realized at the time of a sale. The cost of acquiring a home plays a huge role in calculating one’s ROI, too. Lower purchase prices have become synonymous with more attractive profit margins, which is why most investors choose to invest in distressed homes. More often than not, distressed properties award savvy investors the opportunity to capitalize on attractive profit margins across the country, and Nebraska is no exception.
Real estate investors in Nebraska should pay special considerations to pre-foreclosures. Representing 72.2% of the state’s distressed inventory, pre-foreclosures are the most abundant source of foreclosures in Nebraska. As their names suggest, however, pre-foreclosures aren’t officially in a state of foreclosure but are instead at risk of falling into foreclosure. Nonetheless, pre-foreclosures are more likely to be owned by motivated sellers and are—therefore—more likely to be purchased below market value.
Outside of pre-foreclosures, Nebraska real estate investors should turn their attention towards auction inventory and bank-owned homes. Rounding out the rest of the state’s distressed inventory, auction homes represent 16.7% of the state's foreclosed inventory and bank-owned homes make up the remaining 11.1%. Therefore, if local investors in Nebraska want to increase their odds of landing a deal below market value, the first place they should look is at pre-foreclosures, followed by local auctions and financial institutions.
Of course, knowing where to find deals with attractive profit margins is one thing; knowing what to do with them once they are acquired is an entirely different thing. Nebraska real estate investors need to not only know where to find good deals, but they also need to know which exit strategies to execute once they have them, which begs the question: What should real estate investors in Nebraska do with the homes they buy? Should they rehab and flip them? Should they look into wholesaling? Should they build a long-term, passive income portfolio?
At the moment, investing in Nebraska real estate appears to lean in favor of building long-term, passive income portfolios. If for nothing else, years of cash flow are entirely capable of offsetting today’s relatively high acquisition costs. On top of that, it has never been cheaper to borrow money from traditional lenders. According to Freddie Mac, the average commitment rate on a 30-year fixed-rate mortgage is 2.89%, the lowest it has ever been. Today's borrowing costs are the result of the government trying to stimulate the economy, and it's working. Long-term investors will be able to increase their monthly cash flow thanks to today's low rates.
Nebraska Housing Market Predictions
The Nebraska real estate market has followed the same trajectory as the rest of the country. For the better part of a decade, in fact, real estate in Nebraska has exhibited many of the same characteristics as its national counterpart. Price increases, confidence in the market, and several other indicators are in line with national trends, but what does that mean moving forward? What can Nebraska real estate investors, homeowners, and prospective buyers expect for the foreseeable future?
Appreciation will continue for the foreseeable future: Inventory shortages and demand have helped homes in Nebraska appreciate 4.4% in as little as one year. That said, homes should continue to appreciate for at least the next year, to the tune of about 4.6%. Thanks, in large part, to government stimuli and historically low interest rates, more people in Nebraska want to buy today, before prices march even higher. The added demand will surely drive prices up for the foreseeable future.
Grand Island will see an influx of buyers: Already one of the largest cities in Nebraska, Grand Island is also one of the most affordable. As a result, it’s safe to assume more people will look to Grand Island in an attempt to alleviate nearly a decade’s worth of appreciation. You’ll have to remember, while home prices across the state are low compared to the national average, they are still higher than they have been in more than 10 years. People will likely look to move to Grand Island instead of staying in higher-priced cities like Omaha and Lincoln.
The suburbs will see an influx of people: Since the pandemic has stopped people from needing to live close to work, many people are expected to flee expensive cities. Today's work-from-home culture has enabled everyone to pack up and move to less-expensive and larger living spaces, and Nebraska is no exception. As a result, we may see metropolitan prices decrease while suburban prices increase.
The Nebraska real estate market has become synonymous with affordability. Average home prices across the state are well below the national average, which actually bodes well for residents. In association with an improving economy, Nebraska’s relative affordability should serve to attract buyers from other states. The added attention could catalyze activity and permit the local housing market to thrive—even more than it has in recent history. As a result, it’s safe to assume everyone should like what they see in the Nebraska housing market: buyers, sellers, and investors.
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