The Nebraska real estate market is incredibly affordable compared to other states. As a result, the demand for housing increased during the pandemic. Nebraska’s housing market has recently seen an influx of buyers as more people work from home. Residents of neighboring states have traded small, expensive lots for more expansive plots of land and affordable homes in Nebraska using the services of top real estate agents in Lincoln, NE. Overall, Nebraska is on trend with the national housing market. Rising interest rates are expected to slow the domestic market, but Nebraska’s employment sector appears insulated from the shutdown. This means more people may be willing to explore the housing market even with higher prices. Nebraska’s housing market growth allows the state to offer many lucrative opportunities for investors. However, you have to know where to look for the perfect property.
The profitable real estate market in Nebraska
While Nebraska’s top real estate market is arguable, here’s a list of places investors should pay close attention to:
- Grand Island
Average home prices in Nebraska
The median home price in the Nebraska real estate market is $237,840. According to realtors in Nebraska, average home prices today show nearly a decade of steady growth. During the period (June 2012 to June 2022), home prices across the state increased by 87.3% from current values. Overall, average home prices in the US increased by 110.7%. While showing growth, Nebraska’s real estate market has lagged behind the national real estate market for a decade. Even in the past two years, home prices in Nebraska have lagged behind national trends, with growth rates at all-time highs. Median home prices in the US have increased by 38.3% since COVID-19 was officially declared a global emergency.
Meanwhile, median home prices in Nebraska rose 27.8%. Finally, home prices in Nebraska have increased by 12.9% over the past 12 months. However, average home values in the US rose by 20.7% last year. The difference is significant, but it could work in Nebraska’s favor. Prices are high everywhere, but Nebraska is relatively affordable, which could increase buyer and investor demand from other states with higher home prices.
The Nebraska real estate investment community should expect prices to continue to rise for the foreseeable future. At least the same factors (supply and demand) that have driven prices up in recent years remain the same. However, rising property prices will be squeezed with the rise in interest rates. When the Federal Reserve raises interest rates to fight inflation, fewer people want or are able to get a mortgage with a higher interest rate. As a result, there is a drop in demand, growth may slow, and home prices will fall for the first time in years. Average rents in the Nebraska real estate market track home prices and are also getting squeezed. Last year, housing prices increased by 12.9% and local rents by 8.6%. By comparison, the average rent in the US increased by 12.4% last year.
Today, the average rent in Nebraska is about $1,006. Renters can expect to pay about $844 for a one-bedroom apartment and about $1,013 for a two-bedroom apartment. Of course, prices vary depending on the region and city. Therefore, tenants and investors should get more detailed information from experienced realtors in Nebraska.
The rental market in Nebraska is expected to become even more crowded. When interest rates rise, fewer people apply for mortgages, and fewer homeowners are willing to sell their homes. As a result, the rental market attracts more people, making it more competitive throughout the year. If demand increases, owners can raise the rental price. How high the rent will rise is yet to be seen, but it can be assumed that in 2023 the rent will increase.
The most profitable investment in Nebraska real estate
The Nebraska real estate investment community has relied on resale margins for at least a decade. Historically, affordable property values have allowed more investors to take advantage of attractive margins. But valuations caused by the pandemic have lowered profit margins for at least a few years.
For the past two years, finding a house that can be flipped reasonably has been challenging because it has been too expensive to buy. Gross returns in 2021 were the fastest in a decade after falling the most rapidly in 15 years, despite strong growth in investor income. In 2021, home resales typically generated a national gross margin of $65,000 (the difference between the average sales price and the average amount the investor paid initially). That’s down 3% from $67,000 in 2020. The return on investment is 31% of the original purchase price – the lowest return since 2008.
As rising real estate prices eroded profit margins, investors began looking for long-term strategies. One strategy that has become more viable in today’s market is long-term rental properties. Rent-to-own investors can offset rising prices with attractive borrowing costs. The average commitment rate for 30-year fixed-rate loans was 5.78%. Although today’s historically low-interest rates are increasing quarterly, they present a profitable financial opportunity for Nebraska investors to increase cash flow and offset rising real estate prices. Landlords are able to charge a higher rent, which can pay for the cost of the more expensive mortgage.
Nebraska’s real estate market has followed the same path as the rest of the world. Nebraska real estate has exhibited many of the same characteristics over the past decade. Price growth, market confidence, and other indicators align with national trends, but what does this mean for Nebraska real estate investors, owners, and buyers? What can people expect in the future? The shortage in inventory and high demand have caused building to increase in Nebraska, and the number of homes in Nebraska grew by 12.9% in one year. Made possible in large part by government incentives and historically low-interest rates, more people in Nebraska are now ready to buy real estate before prices rise further. Additional demand is sure to push prices up for the foreseeable future.
Buyers are flocking to Grand Island, one of Nebraska’s largest cities and one of the cheapest in buying affordable real estate. People are moving to Grand Island instead of staying in expensive cities. Moving to the suburbs has also grown. Many are expected to flee expensive cities as the pandemic has made it unnecessary to live near work. Today’s work-from-home culture has allowed everyone to pack their bags and move to a cheaper and larger living space. Nebraska is no exception. As a result, prices in large cities may decrease and, in suburban areas, increase.
The Nebraska real estate market has become synonymous with affordability. The state’s average home prices are well below the national average, which is suitable for residents. As the economy improves, Nebraska’s relative affordability will help to attract buyers from other states. Increased interest could spur activity as people look for more affordable homes and make the local housing market even more robust than it has been recently. Overall, it’s safe to assume that everyone will like what they see in the Nebraska real estate market.
Keep learning about real estate investing
The field of finance is continually developing and changing regularly; therefore, to achieve the best results, continually learning the latest investment strategies is necessary. Books are a helpful resource if you want to invest on your own. Many real estate investing books are on the market today, from audiobooks to classic print versions. Additionally, there are paid and free real estate investing courses. Practical videos on YouTube or posts with practical advice on popular social networks can also be informative. Investing in real estate comes in many forms. Choose one of the options and expand your investment portfolio. If you need more guidance with your investment, try the services of real estate agents. You will be assisted by an experienced specialist who gives you a good chance of making a significant profit. You can also leave the entire investment to a professional employee of a real estate agent who will actively manage all processes for you, freeing you up to pursue other interests.