Archive for the 'Growth Markets' Category
I’m currently reading Dr. Peter Linneman’s “Real Estate Finance and Investments” and it includes some great information on how to predict population growth — the number one indicator of real estate price appreciation and rent growth.
Here are some of my notes:
The simple fact is that the best real estate opportunities are not always found in your neighborhood or local market. You may have heard the saying, “all real state is local”. Well, with over 400 markets around the United States, some markets become more favorable than others as they transition through their individual market cycles. That means that at any given time there will be markets that offer you better opportunity in terms of cash-flow and/or appreciation potential.
There are many advantages to investing in markets that make the most sense:
Three powerhouse metropolitan areas — New York, Los Angeles, and Houston — together accounted for one of every seven new jobs created in the country over the last three years. These top three markets added 300,000+ new jobs from 2012 through 2014.
A total of 17 metro areas added at least 100,000 new jobs during that three-year period.
The transformation of the American Dream, most broadly manifested in popular folklore as the aspiration of the US middle-class to own a home (even if it means agreeing to a 30-year loan with one’s friendly neighborhood too-big-to-fail bank), into the American Nightmare, in which an entire generation (the Millennials) is locked out of purchasing a home due to over $1 trillion in student loans hanging over every financial decision, an abysmal jobs market (for everyone but college educated “waiters and bartenders” whose hiring is on a tear), and banks’ unwillingness to lend money to anyone that can fog a mirror, and forcing millions of Americans to rent instead of buy, has been duly documented here before.
The feedback I get from investors across the country is that we are in a seller’s market. Prices are up. Inventory is low. Properties in the hottest markets are selling over asking price with multiple offers. Investors are paying “more than they want to” just to get a deal done. The ratio between rents and purchase price is favoring sellers and squeezing investor buyers out of the market. Another way to describe this trend is that CAP rates are decreasing, or “compressing”.
We are approaching a delicate part of the market cycle where the flood of inexperienced investors is driving prices up to places where experienced investors shake their head and wonder, “How is the winning bidder ever going to make a profit?”
RealtyTrac released a report identifying county-level housing markets with early warning signs of a possible home price bubble — where prices over-inflate and eventually decline. The report also identified markets with little risk for a home price bubble.
Entering the real estate market is a bold move, especially for those without previous experience in managing or operating rental properties. Mistakes are common and profit is not guaranteed. However, location plays a vital role in first-attempt success rates. Before deciding on a potential investment location, consider trends in both property purchase prices and current rental market strength.
Demographically, a lot has been written about how Millennials and Baby Boomers will impact real estate. But how will 11 million undocumented immigrants impact residential real estate if they are given residency?
Will millions of undocumented immigrants buy houses and increase prices and rents? Already, we are starting to see some signs of how immigration is impacting housing.
Zillow’s second quarter Real Estate Market Report shows national home values rose 6.3% on a year-over-year basis from June 2013 to $174,200. The last time national home values were at this level was back in March 2005. (Housing prices peaked in 2006.)
Rents were up 2.5% on a year-over-year basis. The Zillow Home Value Forecast calls for 4.2% appreciation nationally from June 2014 to June 2015.
Sometimes the grass truly is greener on the other side of the fence. The financial turmoil of the past few years certainly lends credence to that notion, as the Great Recession’s disproportionate impact on local economies spawned a 24-point unemployment rate difference between the most and least bountiful major U.S. cities.
More than 100 million people have moved within the past five years, according to data from the U.S. Census Bureau, and 48% of unemployed individuals have picked up their roots in search of a job over that time-frame. This societal mobility stands to be a major asset for job seekers as the economy improves. In fact, 2014 is expected to be a strong year for hiring, with 27% of employers planning to hire, according to the National Association for Business Economics, and a projected 8% bump in the number of recent college graduates who land jobs, per the National Association for Colleges and Employers.
Housing is local again! Our partners, consultants and clients see vastly different housing markets all across the country. I categorize them into three groups (booming, busting, and muddling) in this article and provide anecdotes from our team members — but it is really more complicated than that.
I find three primary reasons that certain housing markets are booming:
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Want to know how to predict real estate prices?
Every investor wants to know how to predict real estate prices and the process is not as mysterious as it may appear.
While I focus on investing for cash flow, loan amortization, and tax benefits, I also appreciate the warm and fuzzy feeling you get as an investor when your real estate values climb! So, what are the things I look for when figuring out how to predict real estate prices?
The crisis may be over (for the time being) in Washington. But the crisis for America’s middle-class continues, as middle-income jobs get harder to find and the cost of living gets harder to bear. Where can Americans turn for answers? In a word: Texas.
In the cover story of this week’s TIME magazine, libertarian economist Tyler Cowen, author of the new book Average Is Over, looks at why so many Americans are headed to the Lone Star State. And he comes to a surprising conclusion. For better or worse, he argues, it’s because Texas is our future.
Here are 10 reasons why America’s future is going to look a lot more like Texas:
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When people think of a thriving, up and coming city, they don’t usually think of Houston. People tend to associate the city with the smell of oil refineries, oppressive humidity, and the perennially under-performing Astros.
They should take another look. Houston’s an economic juggernaut.
It’s by far the country’s number one job creator, the home of America’s booming energy industry, is more diverse than New York City (PDF) and lets you stretch a paycheck farther than anywhere else in the country.
When the home bubble burst, mortgage sales collapsed, both loan origination and into the secondary market. The sleight hand in marketing mortgage backed securities was immediately exposed, challenging the price of homes and real demand. Then the recession ensued, causing demand to dry up and driving down the price of homes in many local markets. A great number of those markets reset back to pre-boom levels, while others recoiled to well below the levels that local economies and incomes could technically support. Most of these markets are off bottom, but have not returned to their “normal” state.