OfflineIn January every year it’s time for every media outlet to report on all kinds of economic data and make predictions for the coming year. Housing is in the thick of it, and there’s plenty of reporting and predicting going on. In general, a simple statement would be that overall housing markets are improving, but the level of improvement varies significantly by area. Several sources out there are saying pretty much the same thing about the spotty nature of the housing recovery.
National home values ended 2013 up 6.4% year-over-year. Some of the markets that were early to begin improving had already begun to cool off in the fourth quarter of last year. California in particular had been exhibiting rising prices, but increases were beginning to slow or go flat at the end of the year, particularly in Los Angeles, San Diego, San Francisco and San Jose. Some analysts expressed relief, because the heated markets were in their opinion approaching bubble status.
Zillow.com reports that price rises nationally are expected to slow in 2014, predicting a 4.8% rise year-over-year on average for the nation. That’s an average, with a lot of divergence depending on where you are. That 4.8% average will not apply to many markets, with St. Louis expected to experience price declines of -3.1%. The range in area markets will be from 16.1% in Riverside, CA to around 0.4% in Kansas City. Two metro areas actually had price increases that brought values to pre-recession levels, Denver and Pittsburgh.
Bidding War Dichotomy
On this topic, Mortgage News Daily reports that Redfin Realty says that competition as evidenced by bid wars is mixed across the country. Redfin tracks 22 markets across the country, and roughly half of them saw bidding wars rising, while the other half saw them going in the other direction. In markets like San Francisco and San Jose, more than half of homes sold above the asking price.
Bidding wars tend to erupt more at the beginning of the year, and reports are that this is the case in 2014. Other markets like Boston are showing an opposite trend, with fewer competing offers on listed homes.
It seems that investors across the country will need to study each individual market carefully, but hasn’t that always been the case?
How Is Housing Heading Into 2014?
Posted on: Mon, 01/27/2014 - 17:16
How Is Housing Heading Into 2014?
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Buying a home can be a great investment, as investors gobbling up properties over the last few years–when prices and mortgage rates were at the bottom–well know. Now, with homes prices and rates ticking steadily back up, investors are backing away from the market, leaving more room for the rest of us.
Perhaps you fear you’ve missed the best time for buying housing. Prices were low last year, but there are still deals to be had. The good news is that less competition for housing and an overall less-crazed market than in 2013, as I wrote about in Housing Outlook 2014: 10 Predictions From The Experts, can make for fairly decent timing for smaller-time investors. The key is to buy where the prices are still low, in cities with a lot of growth potential.
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Whether you’re looking to get into a first home that you’ll live in for a few years, or simply buy a fixer-upper that you can rent out right away, there are still plenty of cities where your money is a fairly safe bet. We teamed up with Local Market Monitor, which tracks home prices and local economic factors in more than 300 housing markets, to put together a list of the Best Buy Cities–the top 20 housing markets to invest in for 2014. To come up with this list, Local Market Monitor pulled data for the largest 100 metropolitan statistical areas (a geographical designation used by the U.S. Census) with populations of at least 575,000. From there, the choices were ranked primarily on four factors: population, home prices, and the local jobs economy. Each of our Best Buy Cities have high population and job growth, relatively low home prices, and are still considered under-valued (although in every case except Virginia Beach-Norfolk, Va., home prices have gone up). This makes them fairly low-risk investment opportunities for buyers who are smart and know not to overpay.
The key to coming up with this list is a proprietary measure that Local Market Monitor dubs the “Equilibrium Home Price.” Basically, it tracks what the average price for a market should be, if speculation, weird distortions in local income, and other factors (like the housing collapse) weren’t present in the market. The measure presumes that prices will eventually return to this level. When homes are far under the equilibrium price, investors are getting a good buy and can expect to make a good return. The other important consideration for investors is, of course, a healthy local economy. After all, there is zero point in purchasing a home in a market where the population is fleeing. That’s why Best Buy Cities are places where opportunities are growing.
“We are at a stage in the economic cycle where job growth–and demand for housing–is accelerating in some markets,” says Ingo Winzer, founder of Local Market Monitor. “The types of jobs created are often lower-paying, most suitable for renters, younger people who are willing to move from somewhere else and who don’t want to own a house right now but might have a young family and would like to rent one.”
Fort Worth-Arlington, Tex., and Dallas-Plano-Irving, Tex., top the list of our Best Buy Cities, at No. 1 and No. 2, respectively. Both cities offer homes that would be within reach for middle-class Americans, at $168,383 in Fort Worth-Arlington and $180,645 in greater Dallas. Prices in greater Fort Worth are considered 20% below their actual value, according to Local Market Monitor. Homes in the greater Dallas region are 12% down, so less off, but they are expected to rise more–29%–over the next three years.
For buyers who intend to rent out their homes, the populations in these cities are growing at a healthy clip: from 2009 to 2012, at 4.9% in Fort Worth and 6.1% in Dallas. At that rate, Dallas is tied for the fastest-growing city on the Best Buy Cities list. It’s ranked fifth in terms of job growth, at 3% as of the latest Bureau of Labor Statistics stats. Driving the demand are companies like Dallas’s One Technologies, LP, an online credit monitoring marketing service that was ranked the fastest-growing private company in the area by the Dallas Business Journal.
“The total eventual returns may be higher in markets that are still under-priced right now–that’s why those are higher in the rankings–but the rental returns should be good in all of them,” Winzer says. “I particularly like the investment markets in Texas and Oklahoma, with their low unemployment rates and ability to profit for years from new shale oil and gas development.”forbes
— January 13, 2014
Real estate can be a very a prosperous endeavor for the savvy investor, and National Realty Investment Advisory indicates that people can increase their return by delving into the world of 100% new construction investments especially. This firm specializes in helping people who want to invest in the construction of new realty in the Philadelphia area, which is quickly becoming a real estate powerhouse. It is not the only area that harbors massive potential, but Philadelphia has incredible advantages.
A real estate expert will know what steps to take and what path to follow when it comes to creating a real property investment. Amateur real estate investors can also find themselves gaining a favorable return as long as they adhere to the following guidelines:
- The key to real estate is location, location, location. Investors who are looking at constructing new properties should inspect numerous properties to find the best lot. They not only want to look at the plot of land they wish to purchase, but also the surrounding neighborhood. Does the area have nice schools? Is the property near public transportation? What is the demographic like? What is the price vs value ratio?
- When buying the land, investors must take out title insurance. This protects both the owners and the lenders against any risk to the ownership or debt free nature of the property. This damage or loss can be experienced due to liens, encumbrances, or defects in the property’s title. Legal complications can be a real estate investor’s worst nightmare; title insurance guarantees your deed /title is free and clear – so it’s required.
- A land survey is another vital component in the real estate construction investment process. Sometimes, investors will not need a survey done since it may have already been completed not too long ago. Surveying is not always necessary, but it is often encouraged for investors. The survey and deed analysis of the surveyor will guarantee the plot size for building plans. The only downfall of this option is that it can be costly depending on the area. Investors are advised to consult with a professional surveyor to chart the boundaries and assess the land.
Precise required architectural plans are next. A licensed architect will now confirm, draw, and specify what you can really build. From these plans a licensed appraiser can value the building to be constructed “Subject to” the building specifications. This value is critical to knowing what the deal sells for. It also shows you how much less it has to be built for in bidding to Builders. Also use the plans and appraisal to quote out what various Property Managers think the rent will be.
Use the plans precisely specified to quote to your builders in competitive bids. Make sure all materials are clearly outlined by the architect. Quote multiple reputable licensed contractors after checking carefully their references.
- After the complex has been constructed, there is still more work to be done. Hiring a property manager may seem costly at first, but it really is required for the new investor. When they have someone else managing their property, they save time and money on all the many details of tenant recruitment, collections, and management your PM will do for you. It’s always worth it.
- Nonetheless, double check your Property Mangers recruiting work. , If a property owner picks the wrong tenants, you can lose money. They should carefully credit screen all prospective tenants that they plan to rent to so that they can determine if they have any negative incidents in their history. Tenants with bad credit or a history of nonpayment are best to avoid. Always require current pay stubs, proofs of employment, and do a last land lord verification of good standing.dictated