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Posts Tagged ‘Texas’

Home Prices Pass Peak, Go Down In Most Expensive Markets

Since 2012 there has been significant home price appreciation in many U.S. metropolitan areas. Some markets reached levels of unaffordability and continued on a tear until recently. Markets such as San Francisco, New York City and parts of Miami have reached unprecedented highs, accompanied with worries about social clustering, lack of affordability, and the need for long commutes for “regular” (most) people.
In the markets we are interested in and are investing in, there are more diverse scenarios. In the Phoenix and Las Vegas metropolitan areas, prices have indeed gone up quite a bit since 2012 (Phoenix over 100% and Las Vegas almost 100%).  In these two metropolitan areas, affordability is still not an issue. Prices started going up from an exaggerated low point that was the knee-jerk reaction to the Big Crash. Even at today’s prices in Phoenix and Las Vegas, affordability is still not an issue. Most buyers are homeowners and they can use the amazing FHA loan with a 3.5% down payment and the lowest possible interest rate, which makes them less price sensitive.
For investors, Phoenix and Las Vegas are less interesting to buy in at this time, as rents have not moved up very much while prices essentially doubled since 2012. Cash flows are nowhere to be found (and investors can’t use the special FHA loan).
The Texas markets have started their ascent around 2013. In the major metro areas in Texas, prices went up significantly (around 40% in many cases). This is not as extreme as in Phoenix but enough to make investing in the major TX markets less attractive, especially with the high property tax in the state of Texas.
Florida is a bit of a mixed bag. Expensive properties in Miami Beach are through the roof. Parts of Orlando are up about 50%. However, areas in the larger metro area may still be appealing for investment, such as Winter Haven and perhaps Deltona. Tampa is up about 40% but further areas like Zephyrhills are only starting to roar.
In Jacksonville, there has been some price appreciation but in the areas, we primarily look at, prices are still attractive. Partly this is due to foreclosed homes still hitting the market in an AS-IS condition, pulling comparable sales down. The foreclosed properties showing up in the market is an All-Florida phenomenon, as Florida is a judicial foreclosure state and well-defended foreclosures can last many years.
Oklahoma City has been relatively stable with so-far modest price appreciation. It is close to Dallas and the prices are much more affordable, rents are similar, and property taxes are 40% as much! It is a market that is appropriate for investing in at this time. The large oil reserves in the South Central Oklahoma Oil Province (SCOOP) area, which is not far from Oklahoma City, may bode well for future economic upturn (despite the city already being a strong economic market).
While the most expensive metro area prices are beginning to sag somewhat, investors interested in the range of $100K-$200K can still find appropriate places to buy. Couple that with the still super-low interest rates (get 30-year fixed rate loans – inflation starts eroding them from day 1 so the latter years are almost meaningless in terms of the real buying power of the dollar), and you get an excellent combination for the savvy long term real estate investor in the right markets.
Feel free to contact us to discuss. I delight in talking about these subjects. info@icgre.com
We will discuss in further detail, including having market teams talk about these and other issues, as well as expert speakers on important investment subjects, during our ICG 1-Day Expo on Saturday, December 3rd. Everyone mentioning this blog can attend for free (email us at info@icgre.com). These events have been very useful to the attendees, and I learn a lot every time as well. The event is near the San Francisco Airport and starts at 10:00 AM so people can fly in from Los Angeles, San Diego, Seattle, and Portland and so on.
Looking forward to seeing you!
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Appreciation Rates Slow Across the US

Multiple sources report slower appreciation rates in the U.S. overall, year-over-year. The amounts vary from an average of a mere 2.6% all the way to 6%.
It’s hard to attribute that much importance to such general overall numbers. However, the U.S. is not one real estate market but a few HUNDRED local sub-markets. The state of Florida continues its march upwards in the aftermath of the recession and the price improvement that followed. Due to the much slower judicial foreclosure process in and due to the strain on the state’s court system, there are still numerous foreclosures that started as far back as 2008 and are not resolved. This creates a steady “diet” of freshly foreclosed homes, adding to the supply equation and mitigating super-fast rises like we have seen in Arizona and Nevada.

The FL numbers should be superior to the average U.S. numbers reported.  In addition, stable markets are becoming more popular. Texas is becoming a sellers’ market and Oklahoma City is attractive due to its stability, low unemployment rate (reportedly 3.8%), VERY low property taxes and the newly-found reserves of oil & gas; reportedly 3.5 times that of the reserves in North Dakota.
We will discuss this, as well as the ever-changing lending landscape (for the better that is), 1031 exchanges and year-end tax strategies at our upcoming 1-Day Expo on Saturday, December 6th from 9 to 5 p.m. near the San Francisco Airport (click here for details).
Mention this blog and you can attend free with up to two free guests (just email us at info@icgre.com). As always, there’s lots of learning, networking, extensive Q&A’s and meeting the market teams. This time, Dallas will be present in the new markets. Looking forward to seeing you there and Happy Holidays.
 
Appreciation Rates for year end must attend for real estate investors!
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