FEATURE
Investing Hot Spots
investing sector that previous- ly had been closed simply due to too much activity and competition.
creasingly accepting of its medical and recreational uses. Real estate investing in Denver is great if you’re already in, but this is another major metro area that could be difficult to break into. However, the commercial sector in Denver is attracting a great deal of international activity presently and is less competitive than the residential side, making it a potentially intriguing play for investors interested in multi- family, retail or office space. Detroit, Michigan At the nadir of the hous-
Kansas City, Missouri Experts predicted a hot year for housing in Kansas City, Missouri, at the end of last year, and so far, they haven’t been proven wrong. Home prices are up more than 5 percent year-over-year (as of the end of Q2 2016) after a healthy 5.6 appreciation rate for all of 2015. Demand for housing is still heavy, with 38 percent fewer homes on the market at this time than there were last year. However, housing remains relatively affordable with median home prices in the area hovering just over to low unemployment, high affordability, a list of established employ- ers that are constantly growing and an entrepre- neurial/start-up-friend- ly business community is difficult to rival. With rental rates and home values both experiencing overall positive trends since 2012, investors will have their choice of real estate investing strategies in the area. However, take note: building permits are up 29 percent in the region over last year, according to the Home Builders Association of $130,000 and the metro area making “best” lists in terms of livability all over thanks
Think Realty’s List of Top 10 Real Estate Markets and Industry Perspectives factors in local economic trends, employment shifts, investor activity, buying and selling demographics and relevant legislation and policy on state and national levels.
Over the last 12 months, prices in the
by CAROLE J. ELLIS
area have risen 9.3 percent, well ahead of national gains, and Dallas is present- ly second only to Denver, Colorado, in home appreciation. Although falling oil prices are a significant factor in Dallas housing trends, diverse employment opportunities and pro-business tax and legislative policies make it likely that opportunities for investors to get involved in this market, particularly if they wish to own rentals or multifamily properties, will remain available for the rest of the year. Thanks to Dallas’ high profile on the investing scene, individual investors may find it difficult to “break in” to the market at first. Working with a seasoned or connected local presence may be a good way to effectively vet deals and keep close tabs on market and economic shifts. Denver, Colorado At present, Denver, Colorado, boasts the best appreciation in the coun- worst thing upon which to base your real estate investing strategy. Den- ver is undeniably a “hot” market, however, thanks in large part to its attrac- tion to multiple age groups and demographics who are inter- ested in buying at retail value in hopes of prices continuing to rise, highly ranked public schools, competitive safety statistics and an enviable public transit system. Also, we’d be remiss to leave out the “pot market” in the area, but many analysts and local investors warn that marijuana alone will not sustain Denver’s growth as more and more areas of the country become in- try (10.6 percent in the last 12 months) but apprecia- tion alone is probably the
T he national housing market contin- ues to heat up, with U.S. home sales hitting a nine-year high in May and home prices soaring 4.7 percent year- over-year in the same month. Add to that $636.7 billion in much-needed new construction (again, on a national lev- el) up 5 percent in May over April, and it’s easy to see why the “talking heads” on television are eagerly boasting that good times are here for housing again. In reality, however, as every savvy
on state and national levels. These 10 markets represent substantial oppor- tunity to the investors who choose to become involved in them in an effective way at this point in time according to our analytics. Atlanta, Georgia Atlanta, Georgia, lagged behind the national housing recovery and, as a pleasant result, continues to experience traditional appreciation for buy-and- holds in excess of national averages. (The Atlanta
light impact from the Great Recession, thanks to a massive influx of IT-related jobs that shows no sign of slowing, but the population of IT workers in the area is sustaining the city’s growth despite potential “soft spots” in
ing crash, most analysts were more worried about whether there would be a Detroit housing market to rank by mid-2016 than they were about putting it on a hot market list of any type. However, with home prices up 127 percent from their lowest point during
many Texas markets thanks to relatively low oil prices. IT jobs are a great sign of stability in any local economy because they pay
investor knows, housing is not national. It’s regional at best, and generally a local issue that is highly influenced by the individual inves- tor’s abilities and chosen investing strategy. When you pick apart the U.S. “hot housing mar- ket,” you find a lot of trou- bling minutiae in the details.
well, are reliable and tend to create large numbers of other jobs as a result. In Austin, more than six out of every 10 new jobs are in the information technology sector. By comparison, the national average is just under three out of every 10. Current median home prices in the area have gone up 21 percent since 2012, but they are still extremely affordable relative to many IT-heavy California cities, causing a number of tech employees to seri- ously consider moving “back East”—at least a little way—in order to find more affordable, more acceptable housing and commuting situations. With a market that meets the traditional standards for “overvalued,” an investor should always have multiple “fast-action” exit op- tions available or a strategy for holding that involves cash-flow, regardless of appreciation. At this time, Austin still is attractive for these investors. Dallas, Texas Dallas, Texas, is another Lone Star market that is making some people nervous. Concerns about Dallas are creating openings in the real estate
the crash and still 38 percent below peak values, Detroit’s housing market has room to grow and is making more than one hot list these days. If you like paying cash or getting creative with financing, Detroit is a good place to consider, as one in every two transac- tions is still all-cash in the area.
Board of Realtors pegged metro-area appreciation at 6.7 percent in May.) Although local inventory is tightening, particularly when it comes to sin- gle-family “starter homes,” Atlanta still offers multiple
The downtown area of the city is flourishing, thanks in large part to extreme- ly thoughtful, strategic cultivation on the part of large employers in the area like Quicken Loans, which was recently named the “Best Place to Work in IT” for 2016 by industry
entry points for investors, whether they wish to fix-and-flip, pur- chase turnkey rentals or invest in larger projects. With a growing jobs market based solidly on in-demand sectors like IT, entertainment and manufacturing, the city— which RealtyTrac recently named the most affordable in the coun- try—is highly attractive to Millennial workers wishing to purchase their own homes while still living in an attractive, affordable metro area. Austin, Texas Despite recently being named the “most overvalued housing market in the nation” (along with San Antonio) by Forbes magazine, Austin, Texas, has an amazing ability to take this type of licking and keep right on booming. Austin not only experienced a relatively
Greater Kansas, so there are developers clearly looking to fill (and possibly flood) the inventory void. While not all permits ever get used, the
For example, that $636.7 billion sta- tistic flooding the airwaves these days actually is highly misleading because it includes all construction, including public works and power plants. In fact, the only major housing contributor to that number was multifamily housing, not new-home construction in the single-family-residence sector. Think Realty’s “Top 10 Real Estate Markets and Industry Perspectives” is a new type of hot list, factoring in the unseen trends, the unnoticed demo- graphic shifts and the important fine print that most media outlets either fail to consider or deliberately over- look. This list factors in local economic trends, employment shifts, investor activity, buying and selling demograph- ics and relevant legislation and policy
pace at which the city is issuing those permits is much faster than preceding
leaders. Investors hoping to get in on the action in Detroit need to be very careful to be aware of inventory “clogging,” since much of the distressed inventory is so blighted that it cannot be saved and may not be the deal that it appears to be on paper or online. Bring- ing this issue to bear on your strategy, however, and keeping your research and due diligence current should help keep your investments in the clear.
years, and more permits have already been issued in 2016 than were issued for the duration of 2009, 2010 or 2011. However, with a market ideally suited to creative financing and more con- ventional cash-flowing rental options, Kansas City definitely makes the grade as a current hot market. Nashville, Tennessee Although Nashville renters are re-
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SEPTEMBER/OCTOBER 2016 | 5
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