The 4 Hottest US Markets – Not What You Expected

The U.S. housing market continues to show signs of recovery, with median home prices increasing in several key states that were hardest hit during the housing collapse of 2008. Forex traders are taking note of the US house market growth. Looking out for this kind of information is a valuable part of the forex trading course. Trading within foreign markets is a great place for investors to be in as there are so many opportunities for investors to make money. Plus, with the markets becoming more popular, the competitive nature of the markers are all the more thrilling. Of course, investors should read a review, such as the Etoro review, before getting into trading just so they know what they’re getting themselves into but other than that, it’s pretty simple to trade. U.S. home values ending January 2013 were up 9.7% over February of 2012, according to the Federal Reserve Bank of New York. Historically a healthy market appreciation is closer to 3%, which is where Zillow Home Value Forecasts projects the yearly appreciation in the U.S. for 2013. Strong demand coupled with limited supply helped fuel a robust recovery in 254 of 366, or 69% of metro areas analyzed by Zillow. National rental rates continue to climb, up 4.2% at the close of 2012, compared to the year before, with vacancy rates of 4.3%, which is the lowest since 2001, according to Reis Inc.

It is essential to keep in mind several areas on which to focus when trying to identify the best market for an investor in which to purchase. First and foremost would be to study long-term economic and population growth. It is elementary to understand that people move to areas that have jobs, and move from areas with little or no economic future. This obviously creates the demand for housing, and helps support a strong rental market, which ripples into a vibrant local economy. This leads to another area of focus, which is rent to price ratio. There still are many areas in the U.S. which are viable, measured by leases and the cost of becoming a landlord. According to Bloomberg, ?demand for rentals has outstripped Americans? ability or desire to buy.?

The number of rental households increased by 1.1 million in 2012, while the number of owner-occupied homes fell by 106,000, according to Commerce Department data. With foreclosures continuing, and homeowners who are underwater on their existing mortgages making the business decision to walk away from their homes, the rental pool will only continue to grow. And finally, the investor must find the areas of deepest discount for distressed properties. By doing so, they will not only be cash flow positive with their initial investment, they will also be able to take advantage of long-term capital appreciation on their asset. In essence, they would be double-dipping.

Areas of focus that have been identified are; Phoenix, Arizona; Tampa Bay, Florida; Houston, Texas and Boca Raton, Florida. All of these cities represent sound geographic locations, based on the fundamentals of Real Estate Investment listed above.

PHOENIX, ARIZONA
With a population of 1.6 million people, Phoenix is the fifth largest city in the United States. Phoenix, and the metropolitan area including Chandler, Gilbert and Surprise, has a population in excess of 4 million people. Forbes ranked it number 8 on their list of fastest growing cities, while the U.S. Census Bureau estimates that by 2030 the population of Phoenix will grow to 2.2 million, and that the population of the metro area will reach 6.3 million inhabitants.

For the past 20 years, Phoenix consistently ranked as one of the fastest growing economies of all metropolitan areas in the United States. According to W.P. Carey School of Business, Arizona State University, Phoenix ranked second in the U.S. behind Houston in job growth. Wages per employee jumped by 5.7%, while the unemployment rate in December 2012 was 6.7%, which was lower than the national unemployment rate of 7.9%. The manufacturing base of the Phoenix economy is very diversified, and particularly strong in aerospace and electronics. The top 20 companies in the Valley of the Sun employ 275,171 people, of which the State of Arizona, Wal-Mart, Banner Health, City of Phoenix, Wells Fargo, Bank of America, American Express and U.S. Airways Group would be the largest contributors to the job pool. The information technology industry is very robust with hundreds of companies involved in software development, computer system integration or providing internet service. Ultimately, it is undeniable that software development has come a long way in recent years. IT companies can even now hire dedicated development team solutions to develop a wide variety of different types of software. With this in mind, Intel Corporation is investing in a new $300 million software research and development facility in Chandler, scheduled to open in the second half of 2013, which will employ hundreds; the company brings an estimated $2.4 billion annual economic benefit to the area.

The Phoenix area was one of the hardest hit regions during the U.S. housing crash. Median home prices dropped a whopping 59% from $264,800 in June of 2006 to $108,300 in May of 2011. Prices have steadily risen since then, with an influx of investor money coming into the market buying with cash. There have also been U.S., Canadian and International baby boomers purchasing second homes in the Phoenix area. Although inventory is down from two years ago, there still are deals to be found with attractive monthly rental rates above $1,000 for a three bedroom home. There is a very healthy pool of renters who, as a result of poor credit worthiness and stricter lending regulations by traditional banks, do not have the ability to buy at this time.

The returns for investors in this market, for turnkey, property managed single family homes are now between 7-9%, without appreciation being taken into account.

Median Sales Price 3 Bedroom, Rent, Cashflow, Cap Rate

HOUSTON, TEXAS
The City of Houston?s population currently sits at 2.1 million people and is considered to be the economic centre of the American south. The greater metropolitan area of Houston, which would include Houston, The Woodlands and Sugar Lands, has a collective population of 6.08 million, and is the 5th largest metropolitan area in the U.S. The metropolitan population is expected to increase to 6.2 million by 2015. The average household income in 2009 was $76,301, and is expected to increase by 11.9% to $85,409 by 2014.

The driving force behind this population growth is jobs. Houston has been rated as a global city, with an economy based on energy, manufacturing, aeronautics and transportation. Only New York City is home to more Fortune 500 companies. The Port of Houston ranks first in the U.S. in international waterborne tonnage handled and second in total cargo tonnage handled. In 2012 the city was ranked #1 for ?Paycheck Worth? by Forbes. The Houston economy moved from the recovery phase in November 2011, according to The Greater Houston Builders Association, when the local job market regained all the jobs lost in the recession. As a result of the expansion of the energy sector over the past five years, the job market is thriving. Absorption of existing home inventory in the second half of 2012, has caused prices to rise and drive rental rates to unprecedented levels. Although inventory levels are low at this stage, there still are deals to be found.

Houston never suffered the crash of other hard hit cities like Las Vegas. Houston saw somewhat moderate property value depreciation of roughly 13% from peak to trough. It is still possible to find three bedroom homes with a median price of $160,000, which when viewed alongside median rents of $1,600 translates into a Cash Cap of nearly 7% unlevered. The demand for rental properties is endless as a result of the ever-growing economy, steady job growth, and a January 2013 unemployment rate of 6.7%, compared to the national rate of 7.8%.

BOCA RATON, FLORIDA
The population of Boca Raton was 84,566 in 2011, and showed a 13.1% population increase from 2000. It is the second largest city in Palm Beach County, with a population of 1,322,924 inhabitants. Growing at an annual rate of 2.07%, it is expected to be the 12th fastest growing MSA. The state of Florida has an estimated population of 19,317,568. Baby boomers, both national and international, will continue to add to the population, as people will always migrate to the sun, as well as the five miles of beaches.

The top 10 employers in the county represent 9.5% of total employment. They would include: Publix; NextEra Energy; Tenet Healthcare; Hospital Corporation of America; Signature Healthcare; Florida Power and Light; Wackenhut Corporation; Office Depot Headquarters; Winn-Dixie Stores and Florida Atlantic University. Over the next five years, Education and Health Services, Office Using and Government, are expected to add an additional 38,000 jobs to the Palm Beach economy, or 71% of all new jobs, according to the Palm Beach Metro Outlook. There are numerous medical professionals looking at Starting a Home Care Agency as well as other health facilities which will produce thousands of jobs for all types of professionals.

Boca Raton saw a substantial decrease in property values, from median home prices of $390,000 at the peak in 2005 to a low of $172,500 in 2011- a drop of 56%. Prices have recovered to levels close to $200,000 in 2013. There is currently a 5.8 month supply of inventory. Boca Raton is considered to be an affluent community on the east coast, allowing the 25% of the renters in the area to afford the higher rental rates, compared to those in other metropolitan areas of Florida.

Investors in this market can expect returns for a turnkey property in the neighborhood of 7%, not taking into account appreciation.

Population 2011 and 2012 and National Forecast Growth Ranking, US Census

TAMPA, FLORIDA
The population of Tampa was 346,037 in 2011. Tampa is part of the metropolitan area most commonly referred to as The Tampa Bay Area, which includes St. Petersburg and Clearwater. This area?s population is roughly 2.7 million, making it the second largest MSA in the state. The Greater Tampa Bay area has just over four million people and includes both the Tampa and Sarasota metropolitan areas. A 2017 population projection shows an increase to 4,536,854. In 2008, Tampa ranked as the 5th best outdoor city by Forbes magazine. Based on U.S. Census Bureau data, Tampa was the 15th fastest growing metro area in the U.S.

Healthcare, service, finance, tourism and national defense all contribute to a healthy economy. Hillsborough County has an estimated 740,000 employees, a number that is projected to increase to 922,000 by 2015. Tampa Bay led the state in new hires in the month of February 2013, which decreased the unemployment rate from 8% to 7.4% in a month. Tampa and the surrounding suburbs also house 20 hospitals and four trauma centers. Three of the hospitals were ranked among, ?America?s Best Hospitals? by U.S. News and World Report. Tampa?s port is now the 7th largest in the nation, and Florida?s largest tonnage port, handling nearly half of all seaborne commerce that passes through the state.

Tampa Bay was hit hard during the real estate crash. Median home values dropped from a high of $299,970 in 2007 to $150,103 in 2010, representing a 50% decrease in value. Today there has been a recovery of 26% to $188,859, but there is still ground to cover. Inventory is down from the year before, with buyers taking advantage of both low interest rates, as well as discounted sales prices. The rental market is healthy, and the investor can expect returns just shy of 9%.

It is clear that now is the time to act, and to purchase single family homes in the U.S. at discounted prices in geographic areas of strong economic viability. With the ability to rent them out to qualified tenants, it affords the investor both instant cash flow on their investment, as well as future capital appreciation.

Regional Sales Prices at Peak-Trough – Recent Time Periods

Jeffery Gareau, graduated from Upper Canada College in 1986 and Concordia University in 1991 with BA in English. He worked for Tullett and Tokyo Forex Canada Limited as a currency broker, and now for over 20 years he has been involved real estate in the US. He was executive vice-president for a major land developer in Sarasota Florida and then director of communications and sales for a real estate investment fund in Scottsdale, Arizona. Jeff now resides in Toronto, Canada and currently serves as the VP of Sales and Marketing for U.S. Property Shop Inc.