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Top 10 Places to Invest 2008
Top 10 Places to Invest for 2007
Published on: Wednesday, November 28, 2007 NuWire Investor, Written by: Cali Zimmerman
rates: 2 avg: 4.5
Despite the housing crunch sweeping the United States, there are many cities that are viable for investment. Recently, NuWire analyzed data from 98 cities nationwide in order to determine the top 10 places to invest in the U.S.
Five of the 10 cities on this list are in Texas. Because Texas real estate did not appreciate as dramatically as in other areas, Texas has largely avoided the devastating market crashes that have hit the rest of the country so hard. On the whole, the Texan economy remains strong, buoyed further by high energy prices.
"While there will be some short-term pain from reduced construction and layoffs, the state economy's continued expansion, along with attractive home prices, bodes well for the Texas housing industry's future,” D’Ann Petersen, regional analyst for the Federal Reserve Bank of Dallas, said on the bank’s website.
Average of All 98 Cities
• Population Growth, 2000-2006: 4.2% • Population Density: 4,613.27 per square mile • Median Home Value: $248,228 • Monthly Owner Costs (upkeep only): $441 • Monthly Mortgage Payment (80% LTV, 30-year at 6.5%): $1,255.17 • Median Household Income: $44,656 • Homeowner Vacancy Rate: 2.9% • Rental Vacancy Rate: 8.8% • Median Gross Rent: $788 • Unemployment Rate: 7.6% • Job Growth, 2000-2006: 5.15% • Affordability, on a scale of 1-10: 6 • Rent Strength, on a scale of 1-10: 5
NuWire considered many factors when ranking cities, including population and job growth, home values, owner costs, vacancy rates and unemployment rates. More weight was given to overall affordability and rent strength than to other factors.
Affordability was determined by comparing median income for the area to average expenses, including an average monthly mortgage payment (80 percent LTV, 30-year term at a fixed 6.5 percent interest rate). Rent strength was calculated by taking into account gross rental income, the prevailing vacancy rate for rental homes and average ownership expenses. Affordability and rent strength have been ranked on a scale of 1 to 10, with 10 being the most desirable.
Population in 2006: 1,273,374 Affordability: 10 Rent Strength: 10
San Antonio was the ninth most populous city in the U.S. and the second largest in Texas at the time of the 2002 U.S. Census. The city’s population increased by 11.25 percent between 2000 and 2006.
San Antonio has one of the best job growth rates in the country for college educated business and technical professionals, according to CNN Money. The addition of several high profile companies has increased the number of high paying jobs in the area, according to Realty Times. This may account for San Antonio’s impressive job growth from 2000 to 2006—an 8.87 percent increase, the second highest on this list.
Despite being one of the largest cities in the country, the median price for San Antonio homes is the lowest of the top 10, at $96,300. San Antonio’s numbers are strong, aside from a high rental vacancy rate of 10.3 percent.
"Rents are going back to their previous highs,” David Bowman, a San Antonio broker, wrote in Realty Times. “Additionally [San Antonio’s] local employment looks to be poised for expansion evidenced by the high rate of hiring temps in contrast to the national scene....Soon the...state property tax reductions will be a reality and the bottom line for home owners and investors alike will improve. Can you say appreciation?”
San Antonio poised for economic growth, report shows
San Antonio Business Journal - December 15, 2006
The San Antonio area is on the verge of significant economic expansion -- one that will last over the next five years, according to a report released Friday by the Perryman Group.
The metropolitan area's real gross product is projected to experience a compound annual growth rate of 4.17 percent. It is expected to rise from $62.07 billion in 2006 to $76.15 billion in 2011.
Population is also projected to rise from 1.93 million in 2006 to 2.12 million by 2011 for a compound annual growth rate of 1.83 percent. Employment is expected to increase from 879,400 to 963,100 at a growth rate of 1.84 percent.
Household income is expected to rise from $53.98 billion to $66.75 billion for a growth rate of 4.34 percent. Retail sales are also expected to rise from $30.26 billion to $42.68 billion for a growth rate of 7.12 percent.
The San Antonio Metropolitan Statistical Area consists of Atascosa, Bandera, Bexar, Comal, Guadalupe, Kendall, Medina and Wilson counties.
Economist Ray Perryman released the findings at a meeting sponsored by the North San Antonio Chamber of Commerce.
The Perryman report indicates that the services; finance, insurance and real estate; trade; and government industries already generate nearly three-quarters of the San Antonio area's real gross product. This trend is expected to continue in the near future.
Of the $14.08 billion gain in real gross product projected for the area, the services industries will account for about $3.79 billion.
However, over the next five years, several sectors in the region will achieve compound annual growth rates in excess of 4 percent.
These include durable manufacturing; information; finance, insurance and real estate; trade; nondurable manufacturing; services; transportation, warehousing and utilities; and mining.
Of the jobs in San Antonio, about 350,650 wage and salary jobs are in the services sector, which represents about 39.88 percent of the area's total employment. The second highest employer is the government sector with about 182,110 workers.
Over the next year alone, the services sector will add 8,100 jobs, which represents a growth of 2.32 percent. For the entire five-year period, the services sector will add another 41,500 new jobs.
36 of the 100 biggest markets are expected to see price declines. Here are the markets with the worst prospects in 2007.
December 19 2006: 6:43 AM EST
NEW YORK (Fortune) -- This time last year the big question was whether the real estate market was going to slow down. Today it's "How bad will it get?"
The numbers tell a confusing story. For existing homes, buyers are trickling back into the market - sales inched upward in October even as the median home price fell by 3.5 percent, the largest year-over-year drop on record. And that comes after price declines in August and September.
On the new-home front, sales in October fell, but the median price crept upward. For homebuilders, cancellations are up and orders down.
"It's possible that the broader housing market will firm in the next few months, that the worst is over," says Mark Zandi, chief economist at Moody's Economy.com. "But that to me is a dead-cat bounce." In a word, yikes.
So Fortune asked Zandi's group and real estate valuation company Fiserv Lending Solutions to give us their take on what lies ahead for housing in the country's 100 largest metropolitan areas.
The picture, as you probably have guessed, isn't pretty. In 2007, 36 of the 100 biggest markets are expected to see price declines. For 2008 that number rises a notch to 37.
The area poised for the biggest fall in 2007? Stockton, Calif., where prices are expected to drop by 7.1 percent and another 5.3 percent in 2008. If the forecast holds true, a home purchased in Stockton today for $350,000 will be worth a mere $307,917 two years from now. And that doesn't account for the additional toll inflation can take on the true value of your asset.
Next in line to take a turn for the worse: Las Vegas, where our forecasters think prices will sink 6.6 percent next year and another 8.1 percent in 2008.
As of October 2006, San Antonio supply of homes has stayed at a historically low 4-month supply. According to new data from the San Antonio Board of Realtors, the median price of an existing home this year rose to $142,300, up 9 percent over last year's January-August median price of $130,900.
As of June 2006, San Antonio home sales volume is up 7% from a year ago in June 2005, causing supply to decrease 18% to a 4.1 months of supply. This has created a "seller's market" in San Antonio since supply usually hovers around 6 months. In response to decreasing supply, the June 2006 Median Price increased to $146,800, posting an annual appreciation rate of 8.2%.
According to a recent report by real estate research group Local Market Monitor, San Antonio's home prices are still a bargain compared to other national markets. San Antonio's median home price is about 8 percent lower than the firm estimates the price should be. The research firm compared sales prices to "equilibrium" values, which are based on economic and population growth, construction costs, vacancy rates, income in the area and interest rates.
In May 2006, the Texas State Legislature passed comprehensive school-finance reform that lowers school property taxes by about $7 billion over the next three years. The vast majority of school districts had reached the tax-rate cap of $1.50 per $100 of value. That $1.50 rate will go down to $1.33 for the 2006 tax year and down to $1 for the 2007 tax year. Even with rising home values, most Texas property owners will see a 15-20% reduction in their property taxes (about $50-$100/mo). For more details about the school property tax reform, please visit http://texasrealestate.com/web/3/35/stories/taxcut_faq.cfm .
The unemployment rate was 5.3% in June 2006 (down from 6.1% in 2003). The area's annual job-growth figure actually increased 14,500 jobs, which represents an annual growth rate of 1.8 percent. For the fifth consecutive month, the leisure and hospitality sector led employment growth by adding 2,300 new jobs.
San Antonio's population has increased by an average of 2% annually for the last 5 years. Its warm climate and steady economy should continue this trend of positive population growth for many more years.
REAL ESTATE INVESTMENT ANALYSIS
San Antonio has been experiencing higher than normal appreciation rates for the last 18 months, and with San Antonio's decreasing days of supply, it is likely that appreciation rates will stay high around 8% for the rest of 2006.
San Antonio has traditionally had a strong supply of renters from the many colleges throughout the city, health care sector, four military installations, financial sector, and growing jobs/economy. Rental rates should begin to increase in 2007 as additional employment increases and home sales begin to equalize, thus making a longer-term investment worthwhile in San Antonio (especially considering how affordable homes still are, even with the recent appreciation, and the continued population and economy trends). San Antonio offers more appreciation currently at a lower price point, and one could argue it has a better long-term outlook than most markets.
ECONOMY
While Austin's economy and housing market have been on a rollercoaster ride for the last 5 years (both down and up), San Antonio has been the steady neighbor. Since 2001, San Antonio has added jobs at a rate of 1-2% per year and home appreciation has been 4-6% each year. Many jobs come from the medical, tourism, and armed services industries. A new $850-million Toyota trucks manufacturing plant recently opened on the south side of town, ushering in a new wave of residential building around the plant. For timely economic data and housing news such as this, a great source is the Texas Real Estate Center at http://recenter.tamu.edu/ .
Web Posted: 05/06/2008 09:17 PM CDT , San Antonio Express -News
By William Pack
San Antonio is one of the nation's top recession-proof cities, Forbes.com reports in an analysis of economic growth in the nation's 50 largest metro areas.
The Forbes.com study ranks San Antonio second only to Oklahoma City in its ability to withstand recessionary pressures. The study, released April 29, examined unemployment data and job growth through February, along with changes in median home prices and results from a national study on how foreclosures will affect cities.
The report said San Antonio “boasts solid unemployment numbers as well as rising home prices,” with median prices jumping nearly 8 percent in the fourth quarter of 2007.
“Its industries are growing, and it can't hurt that the new AT&T was formed when San Antonio-based SBC Communications swallowed the former AT&T Corp. and BellSouth,” the study says.
Oklahoma City led the pack with “one of the country's strongest housing markets and solid growth in agriculture, energy and manufacturing,” Forbes editors say.
But Texas dominates the report, with Austin, Houston and Dallas-Fort Worth all finishing in the top 10. Austin came in one spot behind San Antonio.
The report says all the Texas cities benefited “from historically lower home prices, which have been affordable to a large segment of the population.”
The study was no real surprise to area economists, who praise the diversity and dependability of the economy.
“It's almost a textbook example of a diversified city,” said Trinity University economics Professor Jorge Gonzalez. “This has been the story of San Antonio for the last 20 years. We don't have the booms or the busts.”
Keith Phillips, senior economist with the San Antonio office of the Federal Reserve Bank of Dallas, said it's not just the diversity of the local economy, it's the stability of the key economic parts — the military, the hospitality sector and health care — that has made San Antonio strong.
The availability of land in San Antonio has been a key factor in keeping home prices affordable, Phillips said.
“We can have volatility in the number of units and not have volatility in prices,” he said.
Mayor Phil Hardberger said he is pleased that the economy has produced jobs for just about everyone looking for work. San Antonio may not be immune from the turmoil in the national economy, but Hardberger said he believes it will stay in better shape than the nation as a whole.
San Antonio Express News
Home prices going through the roof
Web Posted: 04/13/2006 12:00 AM CDT
Jennifer Hiller Express-News Business Writer
The housing bubble may be bursting elsewhere, but San Antonio remains a seller's market.
Sale prices of existing homes climbed 9 percent in the first quarter of 2006, compared with the same quarter in 2005, according to a report released this week by the San Antonio Board of Realtors' Multiple Listing Service.
A shrinking inventory of existing homes and a small supply of new homes that are vacant and ready for move-in — combined with the city's job growth — is helping fuel the price rise.
And school crowding is adding pressure to the Stone Oak home market.
Randall Allsup, San Antonio manager for Metro/Study, a real estate and development research firm, said the bottom line for buyers is this: Move quickly.
(Photos by Helen L. Montoya/Express-News)
New houses like this one being built in the Roseheart subdivision on the North Side are an especially precious commodity.
Ben Moreno of Lopez Paint sands a door in a new home in the Roseheart subdivision on the North Side. The supply of available homes is low, making it a seller's market.
"If you find a house today, you'd better make an offer on it or it won't be there," he said.
The median price of a San Antonio home reached $131,900, a 9 percent increase over the first quarter of 2005, when the median price was $121,200.
That's right in line with what Fortune magazine predicted in its December 2005 issue, when it pinpointed San Antonio as the nation's hottest market for price appreciation, projecting it at 8.3 percent.
The rising prices coupled with the shrinking inventory mean a tight market of fewer choices for San Antonio home buyers.
The number of existing homes for sale shrank to 7,702 homes by the end of March, an 8.5 percent decrease from the number of homes available in March 2005, according to MLS figures.
That's a four-month supply of existing homes if sales continue at the current rate, while a six-month supply is considered a balanced market.
Just 1,500 new homes are ready for move-in, or a 1.2-month supply, according to Metro/Study. Three and a half months is considered balanced.
That's a sharp contrast to the picture across the country, where the number of homes on the market is rising as the real estate market softens.
The national housing inventory rose 5.2 percent in February to more than 3.03 million homes for sale, a 5.3-month supply of homes, according to the National Association of Realtors.
Tight markets in San Antonio mean tight time frames, too. San Antonio-area homes took an average of 64 days to sell in March, down from the 78-day average in March 2005. And homes were selling at 97.8 percent of the asking price at the end of the month.
In the Stone Oak area, sales were especially brisk, up 25 percent in the first quarter.
There, home buyers must have a contract date of April 30 or earlier to enroll their children in Bush Middle School or Reagan High School, two of the North East Independent School District's most desirable campuses. After that, new students will be sent to other schools to ease crowding until the district can open other campuses in 2007.
San Antonio's "hot market" hype might make some prospective home buyers feel pressure to hurry up before they get priced out of the market.
Not to worry, says James Gaines, research economist with the Texas A&M Real Estate Center.
San Antonio sellers will try to get more money for their homes this year — and they will often be successful. But as long as the builders keep producing new homes it will put a constraint on how high prices can go, Gaines said.
"People shouldn't worry about price spikes," he said.
Selection and availability are another matter.
Travis Kessler, CEO of the San Antonio Board of Realtors, said there's still an ample inventory of homes because of the pace of new-home construction.
"They're building as fast as they can in any geographic area," he said. "It's still a very stable market."
The issue then, is not so much the number of houses; it's what to build them on.
Although local builders expect to complete 18,000 homes in 2006, there's growing pressure on builders to find vacant lots, said Becky Oliver of the Greater San Antonio Builders Association.
Metro/Study estimates a 12.9-month supply of lots, the lowest in three years, and well below the 20-month supply that's considered balanced.
"That's extremely low. We're developing and delivering more lots than we ever have before," Allsup said. "The employment picture here in San Antonio is what's driving everything."
Norman Dugas, a residential developer and past president of the Real Estate Council of San Antonio, said lot supply is the biggest constraint right now on the availability of new homes for purchase.
"A month doesn't go by that a new builder from out of town doesn't contact us trying to find lots," he said.
"I tell them all the same thing: We don't have any lots. There are no lots available."
That kind of market can pressure home buyers — especially first-time buyers who typically prefer to spend more time making a decision, said Dwight Hale, Realtor and broker-owner of ReMax North.
"If you want a house, make up your mind and get on with it or get out of the way," Hale said. "Because someone is going to run up your back."
Houses are popping up at a record pace in S.A.
Web Posted: 07/27/2006 12:21 AM CDT
Jennifer Hiller Express-New Business Writer
San Antonio is adding new houses faster than a real estate agent can hand you a business card.
The city saw more new homes started in the past 12 months than in any period in its history.
Builders started 18,598 houses between July 2005 and June 2006, a 26 percent increase from the previous year, according to a new report from Metrostudy, a housing research firm.
"This market has continued to rock and roll," said Michael Moore, vice president of the Greater San Antonio Builders Association. "It's absolutely phenomenal."
In fact, San Antonio is rocking out just when the rest of the country is snoozing to the oldies.
The bubble has burst for much of the U.S., and new homes are selling at deep discounts and with builder-added incentives in an attempt to undercut the increasing competition. U.S. housing starts are expected to slow by 5 percent or 6 percent this year.
But in San Antonio, housing starts were up nearly 30 percent in the second quarter, with builders starting 5,367 homes just in April, May and June alone.
"For the San Antonio housing industry, the second quarter of 2006 was the strongest on record in nearly every category — quarterly starts, annual starts, housing inventory, finished housing inventory, developed lot inventory, lot delivery and future lots," said Randall Allsup, manager of Metrostudy's San Antonio division.
San Antonio's home construction market has been on the upswing since 1991 — an unprecedented period of time, Moore said.
"Never in my wildest dreams did I dream we could do that," Moore said. "Economically you would expect either to have a recession or a slight depression every six to eight years."
Allsup said affordability remains a key strategy for local builders. Half of San Antonio's new homes are priced below $150,000.
That's key, because for every $1,000 of home price, 3,800 families in Texas get priced out of the market, according to the Texas Association of Builders.
San Antonio is one of the few cities in the country where builders can produce new homes at that price, said Jim Gaines, research economist with the Real Estate Center at Texas A&M University.
"It's reflective of San Antonio's low-priced market by national standards," he said. "You can't go too many places in the country that you can build for that money."
Keeping prices affordable is also a way to fend off the usual suspects that can put a damper on home building: rising interest rates and a shaky national economy.
Metrostudy did point out one indicator local builders should watch closely: San Antonio has nearly 2,000 finished, vacant homes, an inventory of 11/2 months.
There's no oversupply, but it's also the highest-ever number of vacant new homes, Allsup said.
If inventory reaches about two months, Gaines said, builders might kick up their marketing and start offering buyers more incentives.
Moore said that's probably not going to happen yet.
"The development and construction industry has not caught up with demand," he said.
Lot inventory — a key measure of demand — remains low. San Antonio has a 13.9-month supply of vacant lots, which shows that builders and buyers are grabbing lots. A 20-month supply of lots is considered balanced.
Still, hurricane season, a slowdown in the national economy, and rising interest rates and gas prices may mean that home building in the second half of 2006 won't reach quite the blistering pace of the first half.
"We may not set another record," Gaines said. "But it's still going to be a good six months."
Home prices down for first time in 11 years, but not in S.A.
Web Posted: 09/25/2006 10:08 PM CDT
Martin Crutsinger Associated Press
WASHINGTON — Annual existing-home prices declined in August for the first time in more than a decade as sales fell for a fifth straight month.
The year-over-year drop in median sales prices represented a dramatic turn in fortunes for the once high-flying housing market, which last year was posting double-digit price gains.
"Pop goes the housing bubble," said Joel Naroff, chief economist at Naroff Economic Advisors. He predicted prices will tumble farther as home sellers struggle with a record glut of unsold homes.
The National Association of Realtors reported Monday that sales of existing single-family homes and condominiums dropped 0.5 percent last month to a seasonally adjusted annual rate of 6.30 million units. That was the fifth straight monthly decline and left sales 12.6 percent below the pace of a year ago.
In San Antonio, however, home prices continue to rise and the inventory of homes on the market remains low.
The median price of an existing home this year rose to $142,300, up 9 percent over last year's January-August median price of $130,900, according to new data from the San Antonio Board of Realtors.
San Antonio has about a four-month supply of homes, which means it would take four months to sell homes still on the market at the current pace.
While San Antonio's housing market has been strong, appreciation has averaged only a steady 4 or 5 percent a year until the past year, when prices started to rise more sharply.
Nationally, the slowdown in sales meant that the inventory of unsold homes rose to a record 3.92 million units at the end of August. At last month's sales pace, it would take 7.5 months to clear out the backlog of unsold homes, the longest stretch since April 1993.
The median price of a home sold last month fell to $225,000. That was down 2.2 percent from July and down 1.7 percent from August 2005. That marked the first year-over-year drop in home prices since a 0.1 percent fall in April 1995.
In 2005, when the five-year national housing boom was reaching its peak, median prices posted a string of double-digit gains on a year-over-year basis. The median price is the point where half the homes sell for more and half for less.
David Lereah, chief economist for the Realtors, predicted price declines would continue for the rest of this year as sellers adjust asking prices in light of the inventory glut.
"This is the price correction we've been expecting," Lereah said. "With sales stabilizing, we should go back to positive price growth early next year."
The drop in existing-home sales in August was not as steep as expected, and some said the recent declines in mortgage rates may help keep the housing market from falling off a cliff.
Bolstered by the lowest mortgage rates in more than four decades, housing set sales records for both new and existing homes for five consecutive years through 2005. However, this year analysts are forecasting that sales are likely to fall 10 percent.
The worry is that the decline could become so severe that it would mirror the bursting of the stock market bubble in 2000, which helped push the country into a full-blown recession.
Richard Fisher, president of the Dallas Federal Reserve Bank, said in a speech Monday that housing was in a "serious correction," and that it and falling auto sales represented the economy's major weak points.
San Antonio MLS Residential Housing Activity
Real Estate: Is the party over? Exclusive forecasts for the 100 largest markets. December 16, 2005 By Ellen Florian Kratz, FORTUNE
NEW YORK (FORTUNE) -- Everybody from Los Angeles to Boston -- your mom, your doctor, your dry cleaner -- is puzzling over which way the nation's real estate market is headed. Up or down? Bubble or not?
It's a debate that's been raging for years, and recently that there have been clear signs of a slowdown. It's unlikely, however, that the housing market will come to a screeching halt.
To get a clearer picture of how things may play out, FORTUNE turned to Moody's Economy.com and home property-valuation service Fiserv CSW.
The researchers crunched numbers on the 100 largest metropolitan regions in the country, and the results of their analysis appear in the table below.
Nationally, the overall outlook seems reasonable: 7 percent appreciation for 2006 and flat for 2007. But markets that have seen the greatest appreciation over the past five years appear to be vulnerable.
Indeed, at some point in the next two years, according to the forecast, a third of the nation's 100 largest metro areas (accounting for 60 percent of the U.S. population) are expected to see modestly falling house prices.
Real estate bear markets often come in the form of steady declines over many years, rather than sudden sharp drops.
As inflation gradually gnaws away at the value of nominal home prices, regular folks might not take much notice. But in the long run the loss of wealth becomes all too real. From 1989 to 1997, for instance, Los Angeles residential real estate dropped more than 40 percent in inflation-adjusted terms.
The nation's most perilous regional market, according to the forecast data: Las Vegas, a speculator-infested hot spot. Prices there are projected to deflate by 7.9 percent next year, the year after by another 5 percent. For newcomers to the market and those with low-money-down deals who may have overleveraged themselves with adjustable-rate mortgages, even a modest downturn could mean financial jeopardy.
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