MARKET & TRENDS
SUPPLY & DEMAND
Reset Expectations
by Ingo Winzer
he renewed plunge into coronavirus disruptions—this time by the omicron
T
Average Home Price (000)
Current Jobs vs Pre-Covid
Home Price/Rent Ratio
variant—increases the difficulty of separating temporary from longer-term changes to the U.S. economy. Economic disruptions often accelerate trends that had already been brewing under the sur- face. On-line shopping, remote working and learning, and the reordering of life-work prior- ities aren’t new phenomena, but the pandemic shifted them to the front burner. Throw in the failures of overseas and domestic supply chains, the gutting of local government finances, the exposure of our expensive hospital and college systems, and it’s almost impossible to know how real estate markets will be affected. One thing that does seem certain is that we need to reset the baseline from which local mar- kets should be assessed. Enough time and dis - ruption have passed for us to conclude that some markets have lost a bunch of jobs for good—and will have lower demand for housing—while oth- ers have recovered the jobs they initially lost and are poised for good economic growth in the next year and higher demand for housing. Lower or higher demand for housing is nei - ther good nor bad. It just means the invest- ment options are different. Lower demand can produce very good returns because it usually means a shift toward more renting in a market where home prices are cheap relative to rents. Markets with higher demand leave more room for error but also must contend with rising home prices, especially right now. The accompanying table lists 10 lower-demand and 10 higher-demand markets investors should consider. Despite the recent surge in home pric- es, none of these markets are (yet) overpriced, and the ratio of average home price to annual rent (although 26 is on the high side) indicates you can still buy a single-family home and rent it out unaltered. •
LOWER DEMAND Detroit, MI
-2.0%
16
$183
-2.1%
20
$199
Dayton, OH
-2.2%
19
$203
Jackson, MS
-2.7%
20
$244
Augusta, GA
-2.9%
20
$217
Tulsa, OK
-3.0%
22
$285
Albany, NY
-3.1%
20
$265
Lancaster, PA
-3.1%
21
$238
Greensboro, NC
-3.4%
19
$197
Wichita, KS
-3.4%
20
$270
Hartford, CT
HIGHER DEMAND Fayetteville, AR
5.5%
26
$277
1.9%
17
$235
Camden, NJ
1.9%
21
$296
New Haven, CT
1.6%
20
$241
Des Moines, IA
1.5%
26
$376
Raleigh, NC
1.4%
20
$191
McAllen, TX
1.2%
22
$270
Kansas City, MO
1.1%
23
$265
Birmingham, AL
0.9%
21
$244
Memphis, TN
0.9%
23
$313
Wilmington, DE
LOCAL MARKET MONITOR, CARY NC
Ingo Winzer is president of Local Market Monitor and has analyzed real estate markets for more than 30 years. The Investors Metro Analysis shows the opportunity and risk in 200 local real estate markets at www.LocalMarketMonitor. com, including the best rent range in all local ZIP codes. Winzer’s views on real estate markets are often quoted in the national press. Previously, Winzer was a founder and executive vice president of First Research, an industry research company acquired by Dun and Bradstreet in 2007. He is a graduate of MIT and holds a master’s degree in finance from Boston University.
56 | think realty magazine :: march – april 2022
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