Party is over: Big land discounts needed for a prosperous country in 2020 Covid Boom market crashes

What I’m thinking: this Complete geographical reversal Residential demand since COVID and why every assumption we make about the 2020-2022 “hot markets” is now responsible.

Data is becoming It is impossible to ignore. Texas, Florida, Arizona, Colorado, and every market outside the Midwest and Northeast are facing Accumulating large amount of housing inventory and downward pricing pressure.

We’re not talking about smaller corrections. We’ve witnessed a Basic transformation That turned the former booming market into a buyer’s cemetery.

Great geographical reversal

In Austin, I’m witnessing the value of a house collapses 20% since mid-2022 – The largest correction in the country (rents fell 20% at the same time, cruel to investors).

My next door neighbor’s rental property (the 2000 sq ft SFR he bought in 2022) has been sitting all the time Most of the time is vacant this year.

He’s asking $3,000 per month Although the market interest rate has dropped to $2,400.

Instead of adapting to reality, they insist on the price in 2022. When I wrote this, the house was still empty.

(I think I feel very stressed about the Tennessee auction situation)

20% crash in Austin: Real-time case study

Although this situation is Every market This has seen the growth of the explosive interconnected era, let’s take a look at a case study near my hometown:

Land investors sent me a portfolio deal: 29 built-in lots About 90 minutes north of Austin, each property is between 0.25 and 0.5 acres, with Complete utilities. This is part In a smaller segment, developers are over-operated and attempted to dump inventory.

Here’s what makes the numbers annoying:

Newly built 2500 square feet homes in the area have been listed as ~$350K And sit in the market More than a year.

The only residential sales in the past 12 months are 50-year-old property move $115-120kplus a premium house and managed to close in the mid-300s.

$10K deal: When standard valuation breaks

Use standard 10% rule (The land deal is about 10% of the value of a home with a home of about $400,000)you want these many people to price around $30-35K each.

But when inventory doesn’t move for $350,000, The rule becomes No sense.

My assessment? Sent location For me (mostly affected by flood ranges, too) may be replaced by another developer ~$10k each If the buyer can get it for them $5,000 per batchconsider insufficient needs and inferior characteristics.

That’s a 66% off (Land investors’ profit margins and 84% discount) comes from “expected” market pricing (Local real estate agents have the courage to quote). Nevertheless, it reflects the reality that inventory does not move in these markets at all.

Survival strategy: How to Hub in the New Reality

There are some key lessons to this market reversal:

Geographic assumptions for 2020-2022 are now liabilities. The popular market three years ago was a dangerous area today. What drives the demand (Remote work, lower housing costs, low interest rates) Completed 180. Prices need to fall.

When residential inventory lasts for a year, land pricing must drop significantly. When the underlying market fails to operate, the standard valuation rules break down. For fill areas you may need 70%+ discount Just to create actions, build actions in your margins.

New data tools are crucial for geolocation. Intuition about a “good market” or relying on past results will kill you. Monthly inventory trends and demographics are now Critical For serious land investors.

((I think Nick Gerli of Reventure Consulting reveals this trend with viable data. I subscribe to his Reventure Application$40 per month to double-check any area of ​​housing trends before we now fund transaction funds. This applies to residential use, which is an important part of most land transactions.)

The cycle requires adaptation, not despair. Real estate is cyclical. Adapt to it. Investors who survive and thrive are those who find a transformation (at least it’s too late) and rotate their strategies accordingly.

If you haven’t caught it yet, it’s OK now. Many institutional investors with multibillion-dollar housing lists are also caught in this surprise shift and are trying to reduce losses as quickly as possible.

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Do you need reliable funds for your next land transaction? Severe land capital is actively seeking development projects and high-value acquisitions. The pain and eye-opening lessons we get from deals like Tennessee property mean better due diligence systems, and fewer surprises on your project.

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PS Want to have a comprehensive breakdown of this 29 case study and my complete geographic analysis? Serious Episode 160 ((Listen on any podcast platform) Read each number carefully and show you exactly how to identify these market changes before undermining your returns. Raw data on new reality of residential demand. No fluff.