Lessons from the Pros

Real Estate Article

Investing in Today’s Real Estate Market

There are some interesting forecasts out there that are predicting home ownership will continue to fall from the high of 70% to 62.1% by the year 2015.  This is in response to a soft economy, low consumer confidence, limited mortgage money and demographic shifts among other things.

John Burns of JBRE Consulting predicts that, based on broad market conditions, we’re going to see a rising number of renters and a larger demand and need for rental housing.  Even though the economy is still soft, we are seeing more household formation, and as I always say, people need to live somewhere.

Where and how do we find which markets are poised for the best long term growth potential?  Your personal goals will define how you look at these markets. Are you investing for cash flow today, for tomorrow’s future appreciation, or both?  With real estate we have the luxury of time to analyze the markets and then act.

NuWire along with Norada have researched and created a 2012 Housing Market Forecast, that lists the top 100 Metropolitan Markets for investing. They are based on future job growth and projected price appreciation.

The data used in the study was based on Metropolitan Statistical Areas (MSA).  You may be familiar with this term as it applies to the Case Shiller Index, which bases its index off the top 10 and the top 20 MSA.  But do you know what an MSA is?  If not, here is a quick definition (as defined by the U.S. Office of Management and Budget – OMB):  These are areas around a densely populated core, typically a city, of at least 50,000 people.  Counties that have strong commuting ties to the core are then included in the definition.  The OMB currently identifies 366 metropolitan areas nationwide, with populations ranging for 55,000 (Carson City, NV) to 19 Million (New York-Northern New Jersey-Long Island, NY-NJ-PA).

MSAs are the geographic building blocks of America’s economy and society.  Unlike individual cities and towns, or large political units like states, these are the places within which most people live day to day. 84 percent of Americans live in metropolitan areas. 58 percent of most workers commute to jobs within their metropolitan area, but live in different towns within that metropolitan area. 79 percent of residents who move, choose to move within the same metropolitan area.  Their shopping areas may change but media coverage, sports teams, cultural institutions as well as natural and infrastructure (air, water, roads and airports) stay the same.  What it means is that MSA “represents the critical geographic lens through which to understand a changing housing market trend.”

I’m going to run down the top 5 of these emerging markets.

1: McAllen-Edinburg-Mission, Texas

Population: 758,247
Unemployment Rate: (Sept. 2011) 11.9%
Recent Job Growth: (Sept. 2011) 2.11%
Future Job Growth: (10 year) 32.3%
Median Sales Price: (Jul’11-Sep’11) $80,072
Appreciation Forecast: (3 years) 23.2%
Appreciation Forecast: (5 years) 37.9%

2: Colorado Springs, Colorado

Population: 634,225
Unemployment Rate: (Sept. 2011) 10.1%
Recent Job Growth: (Sept. 2011) -1.73%
Future Job Growth: (10 year) 26.44%
Median Sales Price: (Jul’11-Sep’11) $179,600
Appreciation Forecast: 3 year 17.1%
Appreciation Forecast: 5 year 27.3%

3: North Port-Bradenton-Sarasota, Florida

Population: 710,060
Unemployment Rate: (Sept. 2011) 10.8%
Recent Job Growth: (Sept. 2011) -0.6%
Future Job Growth: (10 year) 28.0%
Median Sales Price: (Jul’11-Sep’11) $95,003
Appreciation Forecast: 3 year 16.2%
Appreciation Forecast: 5 year 26.7%

4: Las Vegas-Paradise, Nevada

Population: 1,908,259
Unemployment Rate: (Sept. 2011) 13.3%
Recent Job Growth: (Sept. 2011) -2.4%
Future Job Growth: (10 year) 21.9%
Median Sales Price: (Jul’11-Sep’11) $114,000
Appreciation Forecast: 3 year 15.8%
Appreciation Forecast: 5 year 27.7%

5: Denver-Aurora, Colorado

Population: 2,593,813
Unemployment Rate: (Sept. 2011) 9.3%
Recent Job Growth: (Sept. 2011) -0.7%
Future Job Growth: (10 year) 29.3%
Median Sales Price: (Jul’11-Sep’11) $197,000
Appreciation Forecast: 3 year 15.0%
Appreciation Forecast: 5 year 24.4%

The next five Markets are:

6. Harford-West Hartford-East Hartford, Connecticut

7. Springfield, Massachusetts

8. Phoenix-Mesa-Glendale, Arizona

9. Sacramento-Arden-Arcade-Roseville, California

10. Oxnard-Thousand Oaks- Ventura, California

I find it very interesting that NV, CA, AZ and FL are all in the top 10 – the sand states will come back, it’s just a matter of time.

If you would like more information on the rest of the 100 markets, please feel free to email me.

Great Fortune!

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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