By Susanne Dwyer
Housing markets in the three largest metropolitan areas—Chicago, Los Angeles and New York—have always attracted capital, eagerly handed over by investors recognizing profit potential, safety and security. Now, according to new research, other major metro areas are diverting the flow, drawing increased investment in real estate.
The common denominator? Economies flourishing with jobs and skilled workers.
“The growing interest in smaller cities by real estate investors is influenced by their relative affordability, coupled with a concentration of young, skilled workers,” says Mitch Roschelle, co-publisher of “Emerging Trends in Real Estate® 2018″ by PwC and the Urban Land Institute (ULI), and partner with PwC. “The diverse, robust economies of these smaller cities make them very desirable to investors.”
A barrier, for one, has been eliminated. Investors have become knowledgeable about markets outside the usual vehicles, according to PwC and the ULI. These other markets, also, have been less saturated with supply.
Additionally, cities with growth are ideal for investors because returns could parallel their trajectory. The cities with high interest from investors, “Emerging Trends” shows, are (in order): Seattle, Wash.; Austin, Texas; Salt Lake City, Utah; Raleigh-Durham, N.C.; Dallas-Ft. Worth, Texas; Ft. Lauderdale, Fla.; Los Angeles, Calif; San Jose, Calif; Nashville, Tenn.; and Boston, Mass. While Los Angeles appears in the top 10, the real story is in the others.
For No. 1 Seattle, challenging conditions exist.
“The booming employment market in Greater Seattle has brought multiple years of double-digit [home] price growth and less than two months’ [housing] inventory available,” says Sam DeBord, managing broker of the Seattle Homes Group and vice president of Strategic Growth with Coldwell Banker Danforth. According to Zillow, home prices in Seattle have soared 12.4 percent year-over-year.
The influx of newcomers, DeBord says, is piling onto the severe shortage.
“Since our building hangover from the last downturn, the region just hasn’t been able to keep up with growing demand for more housing units,” says DeBord. “Seventy-thousand-plus people are moving into King County every year, while we’re only permitting 10,000 new homes per year. The demand will continue to make rents and prices rise.”
Constraints in housing are not just plaguing Seattle. In Raleigh (No. 4), homebuyers are facing a fast-moving market.
“The Raleigh-Durham area is and has been one of the fastest-growing cities in the U.S. thanks to the economic growth, weather, affordability and quality of life,” says Ryan Fitzgerald, owner of Raleigh Realty. “The growth in Raleigh-Durham has translated to a real estate market with home prices appreciating at a fast rate, especially in the high-demand neighborhoods and locations.”
Fitzgerald says Raleigh-Durham is mirroring another market ranked by PwC and the ULI: Austin.
“If you have watched how Austin, Texas, grew in the last 20 years, you will notice that Raleigh-Durham is following a similar trend,” says Fitzgerald. “The rougher neighborhoods with great locations are exploding with relocating millennials, who are willing to sacrifice neighborhood identity for convenience, location and affordability—and their bets are paying off. As a relocating millennial myself, I targeted the East Downtown Raleigh area
From:: Finance and Economy
