According to Corelogic data from earlier this year, the Memphis foreclosure rate is 1.48% of the total homeownership market. At the same time, the national average stood at 2.30%. Although the numbers are small, they show the Memphis foreclosure rate is 35.7% lower than the national average.
Why the Memphis Foreclosure Rate is Lower
Affordability of housing is the primary reason the Memphis foreclosure market is lower than the national average. During the foreclosure crisis, it was generally recommended that mortgage payments not exceed 30% of a household income. That's at the high end. The national average mortgage stands at 12.6% of income. In Memphis, it is less than half of that at 5.7%. Clearly, housing is much more affordable in Memphis than in most of the country.
Looking forward at possible future foreclosures shows a declining rate of 90 day or more delinquent mortgages. Corelogic also finds the Memphis mortgage delinquency rate has dropped from 8.76% to 7.68%. If your investment model is based on the foreclosure market, it's time to change your investment model. Fewer foreclosures means more competition, which leads to higher prices and lower profits.
The Market Going Forward
If you were on the sidelines waiting for the perfect time to invest in Memphis real estate, you missed it. That happened more than a year ago. That only means you missed the bottom of the market. There is still plenty of growth in the future.
At the end of August, there were 6,599 house listed for sale in the Memphis area. That's only a year on year decline of 2.6% according to the Memphis Area Association of Realtors. When you compare the small decline in inventory to the increase of 11.6% in sales, it becomes clear the Memphis real estate market is in a growth phase. Now add on the fact that house prices are up 10.3% year on year and it indicates a moderate to robust growth market.
You may have missed the bottom of the market but if you jump in now, you still have the opportunity to be part of the growth market. As always, real estate operates in cycles. Keep your eye on the overall economy to predict when the cycle will again turn downward.
Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.