NUTS & BOLTS THE BIG PICTURE
STRATEGIES: REITs M RKET UPDATE
We went on to suggest that investors should carefully examine areas of the city affected by the Metropolitan Area Proj- ects (MAPS), the city’s ongoing series of public-private development partnerships widely considered to be one of the most successful of its kind, to identify areas that would either evolve and begin to or continue to attract residents. We recom- mended focusing on “starter homes” for cash-flowing turnkey rentals or flips be- cause inventory was relatively tighter in that tier of property and Oklahoma real estate laws and regulations would allow for discounted purchases of tax foreclo- sures directly from the city or state. So what has happened in Oklahoma City since we warned about “a few clouds on the horizon” in the market and advised investors to “take care?” • Median home values have risen slightly, by about 4 percent, and homes are selling for a median price of just under $140,000, with the met- ro area posting slightly higher sales prices than surrounding areas. • Homeowners appear to be optimis- tic about their homes’ values, with a number of listing data sources report- ing median listing prices ranging from $150,000 to more than $200,000. • Projected gains in value over the next 12 months are hovering between 2 and 3 percent. • Over the course of the last year, Okla- homa unemployment rates remained between 4 and 5 percent, and always close to but below national levels. According to the U.S. Bureau of Labor Statistics, the area’s unemployment was 4.2 percent at the end of 2016, the lowest since May 2016. • The U.S. Census Bureau reports that Oklahoma City’s population has risen slowly but steadily. Investors
should take note of two factors affecting population trends and homeownership, however:
chemical company; Hobby Lobby; and Love’s Travel Stops, a fami- ly-owned chain of truck stops and convenience stores. • In 2016, the city’s Greater Oklahoma City Partnership (GOCP) worked with dozens of business entities, including Dell, AAA and Tinker Air Force Base, to expand their business presence and create new employment opportunities. This program contin- ues with good effect in 2017. Based on these changes and devel- opments, we would say that a careful investor with a regionally appropri- ate strategy for buying properties in Oklahoma City below retail and a plan for establishing reliable cash flow could likely continue to invest successfully in the area. Flipping will also remain viable, but investors should be prepared to hold properties on the market to get their asking price and focus on buying well below retail rather than taking risky deals reliant on organic apprecia- tion to generate significant profit. Housing inventory in the area ended 2016 with a 3.63-month supply, and January 2017 posted a spike in hous- ing-start permits for the area, so be aware of how future development might affect your investment strategies. Make any predictions involving shorter-term investing with a healthy dose of cau- tious pessimism. Note: Investors should be aware that home- owners involved in judicial foreclosures in Oklahoma can demand that their properties not be sold for less than 66 percent of market value. All indications are that this option is very seldom utilized. • Carole VanSickle Ellis is the host of Real Estate Investing Today, a daily nine-minute investing podcast, and the editor of the Bryan Ellis Investing Letter. Contact her at editor@bryanellis.com or visit www.selfdirected.org.
∙ The city’s Hispanic and Latino population is relatively large, at nearly one in five residents, and increased 85 percent between 2000 and 2010. The new administra- tion’s immigration policies could affect some undetermined subpop- ulation within this group. ∙ The city’s homeownership rate is lower than the national average, with about 40 percent of the popu- lation renting. • Rents have remained fairly steady for the past 12 months, rising slowly to $1,100 in average monthly rent for a three-bedroom residence inside the city, and $950 monthly outside the metro area. • Oil appears to have stabilized, ending February 2016 at just under $57 a barrel. As long as prices remain above $50 a barrel, oil “bears” predict that U.S. crude oil production will likely continue to increase, which is good for the local economy. However, critics of this strategy say that it could prevent OPEC from “drying out the market” and drive oil prices below $50 a barrel once more, meaning that energy-sector employment in Oklaho- ma City will likely remain volatile for the remainder of the year. This is not necessarily a bad thing for investors owning cash-flowing rentals, since workers may be more inclined to rent than buy while things are uncertain. • The population of major corpora- tions in the area continues to be dominated by energy players like Chesapeake Energy and Devon Energy, but the field is tempered by NYSE-listed Tronox, a worldwide
Market Update OKLAHOMA CITY COOLING BUT STABLE AFTER A BLAZING START A YEAR AGO.
by Carole VanSickle Ellis
I
n 2016, Oklahoma City’s real estate market started things off
rates hovered just under $1,000 a month, and home values were around $130,000. We observed these positive develop- ments with pleasure last April, but ad- vised real estate investors to temper them with a healthy grain or two of salt, given national uncertainty about plummet- ing oil prices, which were, at the time, coming off a nadir of barely $26 a barrel in February 2016. Given Oklahoma City’s dependence on the energy sector, there was definitely cause for concern, even though its economy is more diverse than one might think at first glance. We
noted that the state alone employs more than 47,000 individuals; the U.S. military maintains a healthy presence in the area; and the University of Oklahoma and a variety of information technology (IT), engineering and health-related employ- ers could help bolster losses stemming from issues in the oil industry. “While Oklahoma City’s large economy is indisputably tied to oil, there are [employment] alternatives for residents. Furthermore, a change in oil price trajectory could shore up the local economy before it slides too far,” we said.
with a bang. The Sooner State’s capital and largest city benefited from the wider area’s sunny predictions, getting a great deal of press out of Oklahoma’s “9.2 out of 10” rating on the health of its real estate market (from Zillow), a MarketWatch article that listed Oklahoma City itself as “the best real estate market for first-time homebuyers” and general consensus throughout the forecasting and analytic industry that Oklahoma City is “the best place to live” in the state. Median rental
32 | think realty magazine may :: june 2017
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