The Nebraska real estate market boasts incredible affordability, relative to its peers. As a result, The Cornhusker State has seen housing demand increase in conjunction with prices during the pandemic. With more people "working from home," the Nebraska housing market saw an influx of buyers over the last few years. Residents of nearby cities were more inclined to trade their small, expensive confines for larger, more affordable homes in Nebraska.
All things considered, Nebraska may have a chance to pace the national housing market. Higher interest rates are expected to slow the national market, but Nebraska's job sector appears to have been slightly more insulated from the quarantine. Statewide unemployment is particularly healthy, which means more people may be ready and willing to jump back into the housing market at higher rates. That's not to say Nebraska doesn't have its own headwinds, but rather that it may be more prepared to fend them off than other states.
In the event the Nebraska housing market is able to maintain activity and increase its inventory levels, the state may offer investors ample opportunities; they just need to know where to look.
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:
Number Of Homes Sold: 1,780 (-5.2% year over year)
Number Of Homes For Sale: 3,364 (-4.8% year over year)
Months Of Supply: 1
Median Days On Market: 6
Median Rent Price: $1,006 (+8.6% year over year)
Price-To-Rent Ratio: 19.70
Unemployment Rate: 1.9% (latest estimate by the Bureau Of Labor Statistics)
Population: 1,963,692 (latest estimate by the U.S. Census Bureau)
Median Household Income: $63,015 (latest estimate by the U.S. Census Bureau)
Foreclosure Rate: 1 in every 6,920
Nebraska Median Home Prices
The median home value in the Nebraska real estate market is $237,840. Today's median home value represents about 10 consecutive years of growth. In that time (June 2012 to June 2022), statewide home values went from about $127,000 at the bottom of The Great Recession to where they are today, an increase of 87.3%. To put things into perspective, the median home value in the United States increased 110.7%.
Appreciation rates in the Nebraska real estate market have failed to keep up with their national counterparts for the better part of a decade. Even in the last two years, as appreciation rates ave reached historic levels, Nebraska home values have trailed national trends. The median home value in the United States has increased 38.3% since COVID-19 was officially declared a global emergency. The median home value in Nebraska, on the other hand, increased a slightly more modest 27.8%.
More recently, Nebraska home values have appreciated 12.9% in the last 12 months. The median home value in the United States has increased 20.7% over the last year. The difference is noticeable, but may actually work in Nebraska's favor. While prices are high everywhere, Nebraska's relative affordability may drive more demand from more expensive states.
The Nebraska real estate investing community should expect prices to continue rising for the foreseeable future. If for nothing else, the same indicators which have increased prices in recent years (supply and demand) remain in place. That said, rising interest rates will put a cap on how high home values get. As the Fed increases rates to combat inflation, fewer people will want to take out a mortgage at a higher rate. The resulting lowdown in demand could temper appreciation and perhaps even drop prices for the first time in years.
Nebraska Median Rent Prices
Median rental rates in the Nebraska real estate market have followed their home value counterparts. While home prices have increased 12.9% in the last year, however, local rents have increased a slightly more modest 8.6%. For context, the average rent in the United States has increased about 12.4% in the last year. While the actual cost to rent may not have increased more in Nebraska, it has increased more than the national rent relative to home prices.
Today, the median rent in Nebraska is about $1,006. Consequently, renters can expect to pay about $844 for a single-bedroom unit and $1,013 for a two-bedroom unit. Of course, prices will vary from neighborhood to neighborhood and city to city, so both renters and investors should check their local listings for more accurate information.
Moving forward, Nebraska's rental market is expected to grow more crowded. As interest rates rise, fewer people are expected to apply for mortgages and few homeowners are expected to sell because they don't want to deal with higher borrowing costs. Consequently, more people will be driven to the rental market, increasing competition throughout the year. With more demand, landlords will have the ability to increase asking prices. It is too soon to say just how high rents will go, but it's safe to assume they will grow over the course of 2022.
Nebraska Foreclosure Trends & Statistics
According to ATTOM Data Solutions’ Q1 2022 U.S. Foreclosure Market Report, 78,271 U.S. properties received a foreclosure filing (default notices, scheduled auctions, or bank repossessions) in the first three months of 2022. At that rate, foreclosures were up 39% from the last quarter of 2021 and up 132% from the previous year.
“Foreclosure activity has continued to gradually return to normal levels since the expiration of the government’s moratorium, and the CFPB’s enhanced mortgage servicing guidelines,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “But even with the large year-over-year increase in foreclosure starts and bank repossessions, foreclosure activity is still only running at about 57% of where it was in Q1 2020, the last quarter before the government enacted consumer protection programs due to the pandemic.”
The Nebraska real estate market contributed its fair share of foreclosures to national market trends in the first quarter. With 267 foreclosures in the first quarter, one in every 3,162 homes was distressed. That number was up 190.2% from the previous quarter and 178.1% from the previous year.
As recently as April, one in every 6,920 homes in the Nebraska real estate market was considered distressed. Investors interested in taking advantage of the foreclosure market should pay special considerations to the counties with the most foreclosures per housing unit:
Tax Lien Investing
Tax Lien or Deed: Tax Lien State
Interest Rate: 14%
Redemption Period: 3 Years
Nebraska Real Estate Investing
The Nebraska real estate investing community has relied on profit margins from flips for at least 10 years. In the past, lower home values enabled more investors to capitalize on attractive margins. However, appreciation brought about by the pandemic has weighed on profit margins for at least a few years. In two years, it has grown harder to find homes to flip because they are too expensive to acquire. While more people flipped than ever last year, profits weren't what investors had come to expect.
"Even as quick-turnaround sales by investors shot up, gross profit margins on home flips in 2021 sank to their lowest level in more than a decade after dropping at the fastest pace in more than 15 years," according to ATTOM Data Solutions year-end 2021 U.S. Home Flipping Report.
Per the latest report, "Homes flipped in 2021 typically generated a gross profit of $65,000 nationwide (the difference between the median sales price and the median amount originally paid by investors). That was down 3 percent from $67,000 in 2020 and translated into just a 31 percent return on investment compared to the original acquisition price – the lowest margin since 2008."
With profit margins dropping because of higher home prices, investors started turning towards long-term strategies. Across the country and in the Nebraska real estate market, one strategy became more viable in today's market than any other: long-term rental properties.
Rental property investors can help offset high prices with attractive borrowing costs. As recently as June, the average commitment rate on a 30-year fixed-rate loan was 5.78%. While up year over year, today's rate is historically low and represents an excellent opportunity for Nebraska investors to increase cash flow and offset higher acquisition prices. 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.
Nebraska Housing Market Predictions
The Nebraska real estate market has followed the same trajectory as the rest of the country. Over the last 10 years, 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 12.9% in as little as one year. That said, homes should continue to appreciate for at least the next year. 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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