If you are a home-buyer, you are also a real estate investor. The purchase of your home may very well be the biggest investment that your family will make. Although many more factors are involved in the home buying decision than investment opportunity, the long term appreciation should be factored into your decision.
The following is the criteria that I look for in any real estate market.
Look for a bubble proof environment.
The Dallas area as a whole has had a steady 4% to 5% annual appreciation for the last decade, however, some areas have far surpassed that performance. Last year Park Cities increased 14%, Princeton jumped 23% and Farmersville increased 35%. Knowing where to invest in the Dallas area is crucial.
Dallas sat out the housing boom of 2001-2006. In fact, Dallas homes appreciated below the national median for over 16 years, until this year. Recovering from the oil embargo of the 70s, the Savings and Loan crisis of the 80s and technology meltdown of the aughts, Dallas never got up off its knees.
Realty Times 10-13-2007
Look for a market with huge snap-back potential.
Before the bubble burst, Dallas was 11% undervalued while many California cities were 40% to 50% overvalued. Most economists agree that the national market is adjusting back to value. This is why as California is going down, Dallas will be coming up.
NAR expects the national median price of homes to drop to $218,200 in 2007. In Dallas, where it's warm, wide-open, and there are lots of jobs, the median home price is going up. One of the few bright spots of the retreating housing market, Dallas is beating national numbers in jobs, culture, and inflation in terms of housing appreciation. And with a median-priced home only two-thirds the price of the national median at $156,000, the city is a screaming, stomping bargain.
Realty Times 10-13-2007
Look for an area of strong demographic growth.
Supply and Demand...The higher the population growth is the higher the demand for housing. Not surprisingly, population growth accompanies job growth.
The Dallas-Fort Worth area gained 842,449 residents from April 1, 2000, to July 1, 2006, the second-largest numerical gain of the nation's 361 metro areas, bringing the total population to about six million.
U.S. Census April 2007
Look for a strong, growing, and diverse economy.
Unlike Houston which is an oil city or Austin which is a tech city, Dallas is the most business diversified city in the state. This cushions the city from major industry specific economic fluctuations.
The Dallas-Fort Worth area added 91,500 jobs between March 2006 and March 2007, the largest numerical increase among the 12 largest U.S. metropolitan areas. The local job growth rate during that period was 3.2 percent, more than double the national increase of 1.5 percent, and total non-farm employment for the area stood at 2,915,000 in March 2007.
Bureau of Labor Statistics.
Look for an area of growing retirement population.
Retirees provide an area disposable income without taking a job. We consider retirees as bonus population. They buy or rent, infuse the economy with money but do not take jobs or populate the schools.
In 2005, Texas gained 27,000 new residents over the age of 65, bringing a total of $732 million in added income to the state. While that's less than half of Florida's gain at 68,000 new older population and $1.9 billion, what's significant is a large number of workers and retirees are not "following a job" to the state, but choosing to live there on Texas' merits. The retired population will more than double in the next ten years. Affluent retirees have disposable income. They also foster the creation of new businesses tailored to retiree specific needs.
Realty Times 10-13-2007
Look for new and substantial infrastructure changes.
Highways and other infrastructure changes almost always affect property value positively. Projects of these magnitudes don't happen overnight so get informed early and buy in these areas.
Click on http://www.keepitmovingdallas.com/ to see the newest Texas Department of Transportation projects for Dallas.
Only move into undervalued markets.
When incomes rise faster than home prices, the market becomes undervalued. Undervalued markets are the only place in which to invest. You help protect your investment from any real estate bubble and you help guarantee your long-term valuation.
Some Realtors say the smart housing investment money is starting to move out of the hot markets and is beginning to heat up cities no one has been talking about in a long time, like Dallas, Little Rock and Raleigh-Durham, all boom towns of yesteryear. Dallas is under priced by 11 percent and Austin by 5 percent.
Realty Times 10-25-2007
Always acquire a property with strong potential for appreciation.
Fortunes are made through appreciation. Positive cash flow aids in the ability to hold the property while it appreciates. Many investors purchased properties that had negative cash flows in the bubble areas, counting solely on appreciation, and are now in trouble. If it does not cash flow...Do not buy it. Dallas continues to be one of the cheapest big-city housing markets in the country, according to a new comparison of U.S. housing costs.
The snapshot comparison is based on the purchase of a 2,200-square-foot, single-family home with four bedrooms, 2 ½ baths, a family room and a two-car garage in a neighborhood that would appeal to relocating families. That house costs $302,198 in the Dallas area, compared with an average of $422,343 in the 317 U.S. markets surveyed.
Dallas Morning News 10-27-2007
Look for tightening vacancy trends.
Do not invest in a market saturated with income properties and no renters. Pay close attention to the new construction and vacancy trend cycles. Overbuilding increases vacancy rate but overbuilding is almost always followed by under building, to the great benefit of rental properties.
Renters filled almost 7,000 apartments since the end of June, according to statistics released Tuesday by apartment analysts at M/PF YieldStar Inc. The increase in net leasing pushed overall apartment occupancy in the D-FW area above 94 percent - the highest level in six years.
Dallas Morning News 10-26-2007
For more information about why Dallas is a great area to purchase, I highly recommend that you visit DFWHousingFacts.Org.