MARKET BREAKDOWN
REGIONAL SPOTLIGHT: BUFFALO, NEW YORK
investors may be able to build a cash- flowing rental portfolio more quickly than they might in more expensive markets, access off-market deals at deeper discounts or enjoy wider margins than might be possible in more expensive markets. Also, analysts indicate that there is still time to get involved in the Buffalo market. WalletHub recently ranked 196 U.S. cities in order of best (1) to worst (196) places to flip houses, and although Buffalo fell in the middle with a ranking of 96, WalletHub rated it in the top 10 for “market potential.” Given that the city is also ranking in the top 10 on lists such as “best earning potential for recent college graduates,” “best combination of housing affordability and earning potential,” and “hottest hipster housing market,” the stage is clearly set to welcome young professionals who may move into the area as renters, bolster the economy, and remain as long-term renting residents or, eventually, homeowners. “With the new science and technology expensive markets, access off-market deals at deeper discounts, and enjoy wider and New York’s tax incentives for businesses, we expect home values and rent premiums to be on the rise for years to come,” said Fuller. Zillow recently ranked the market 27th for market growth thanks to a seven-year gain of 29.1 percent value in a “typical” local home. The same study indicated that these “typical” homes hover in value around $150,000, right in the middle of national definitions of affordability. IS THERE STILL AN UPSIDE IN UPSTATE NEWYORK? With numbers like these, Buffalo, unlike other markets that may keep it company on national hot lists, still has a way to go before its home prices broach levels that might create purchasing
and one is involved in the design and manufacture of aerospace and defense systems. The city has also teamed up with Rochester, New York, to make a play for Amazon’s coveted second headquarters, HQ2 (see sidebar, p. 48). AFFORDABLE HOUSING IN AN ERA OF UNAFFORDABILITY At a time when most industry experts agree that the U.S. is facing a housing affordability crisis, Buffalo represents unique opportunity for both real estate investors and would-be homebuyers. Due to a variety of factors, many metro-area housing inventories, particularly in urban areas, have not expanded on pace with the demand for residences in these areas. The result has been a troubling combination of rising home prices and relatively stagnant wage growth, putting more and more would-be homebuyers squarely in the realm of long-term renting because they are unable to save up a down payment or afford monthly mortgage payments on their incomes. In the Buffalo-Niagara area, while this situation may be developing, it is not as fully blown as in other, similar metros. Researchers at the McKinsey Global Institute warned in a recent report on the topic that this trend ultimately hurts housing markets because when large swaths of the population struggle to meet their housing costs, economic growth in an area founders as well. The same researchers noted that markets exhibiting this type of trend often are fruitful areas for flippers who may gain control of a property, improve it, and then sell at a new local high for a street or neighborhood, thereby driving comparable home values up farther and faster. Strictly from an investment standpoint, a “hot” market like the Buffalo-Niagara market that is also still accessible to first-time buyers and attractive to long-term renters is relatively rare. Thanks to the relative affordability of the market, real estate
BUFFALO COMBINES FORCESWITH ROCHESTER TO BID ON AMAZON’S HQ2
B uffalo and Rochester, New York, might not be able to lure internet retail behemoth Amazon to either of their local markets on their own, but the two cities are hoping that a joint proposal will land them in the running for Amazon’s second headquarters, HQ2. The joint proposal is one of four from New York state, with others coming from Syracuse and the central Mohawk area, the greater Albany area, and “downstate New York”, which includes New York City, Long Island, and Westchester County. Interestingly, the state of New York is sending an accompanying “bid” along with all four packages that lists state-sponsored financial incentives the state will apply to any of the four markets in the event that Amazon selects it as the HQ2 location. Local Buffalo officials admitted that they believe their bid is a long shot, but said that the benefits to winning made it imperative that they at
least try. “There will be whole industries and businesses that will form around [HQ2], and that will create even more opportunities,” said one of the local businessmen who worked on the top-secret bid. Although the specifics of the bid are secret, local officials say it contains four potential sites for HQ2. There are two in Rochester and two in Buffalo. Although even beating “neighbor” New York City might seem insurmount- able, Buffalo’s status as one of the most affordable housing markets in the country is likely to make it an attractive location from an Amazon employee standpoint since HQ2 is likely to bring more than 50,000 jobs, many of them transplants, to its eventual home. “It’s one of our biggest strengths that we’re affordable,” said CEO of Health- Now New York, who helped craft the joint proposal.
48 | think realty magazine :: year end 2017
thinkrealty . com | 49
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