Housing cycles-multifamily

[Account Closed]

Hi,

I am looking to find a multifamily complex, about 25-75 units or so. Class C+/B-. As I am looking at where to invest, I have been trying to understand real estate cycles and am struggling somewhat. Perhaps someone can help me with this.

Specifically, I am trying to identify markets that are past their bottom, and are clearly at the beginning to mid stages of recovery. Places with a good future. I understand that single family home cycles are different than multifamily cycles. I am looking at multifamily.

I hear that TX has good markets, but wonder if they are too far along in recovery to have great opportunities. Certainly they have great growth, but wonder if the best deals have been picked over.

I sure would appreciate any help with identifying: 1) How to evaluate the multifamily cycle, and 2) suggestions of places fitting above criteria. I have been looking in TX (Dallas and Houston), but wondering about Oklahoma City, Kansas City (MO), Raleigh (NC), Scranton (PA). Others?

Thanks a bunch, Jeffrey

[Peter Dalal]

Dear Jeffrey

As stated by Jeff Greenberg, Job growth is an important factor in recognizing market cycles. Also migration patterns are very important as well, which Jeff stated.

There are four phases to the Market cycles: Buyers market phase one, Buyers market phase two, Sellers Market phase one and Sellers Market phase two.

According to your requirement on the post, you are looking for Buyers Market phase two, which is one of the four parts of the Emerging market cycle. Many markets in the USA have already passed Buyers Market phase one. The cycle duration between each phase is about three to five years. However, the complete duration between all four phases of the market cycle is approximately eight to twelve years.

The order of these cycles are:

Buyers Market phase one, Buyers Market phase two, Sellers Market phase one and then Sellers Market phase two.

The following are typical characteristics of this cycle: [Buyers market phase II]

* Single family homes prices first rises

* Market demand absorbing oversupply of the properties

*Job growth is increasing in area: Please look at www.bls.gov, call Chamber of commerce in the areas to find out which big corporations moving in to areas of interest.

* Migration started happening from out of town people

* Price appreciations in the area slowly

* Rents in those areas slowly increase, after being stagnant for couple years

*Demand for housing starts increasing in the area

*Time duration for the property to stay on market decreasing slowly

* Very little speculations

*Existing properties in the areas start getting rehabbed

*Number of foreclosures started decreasing

Note: In my knowledge, David Lindahl was the first one to recognize Emerging market cycles and genuine person to follow. He has written many books such as Multi-Family Millions and Emerging Real Estate Markets.

There are approximately 17 markets steadily growing on a technical analysis basis for the last year. They normally create a wealth phase and referred to as the "millionaire making phase".

The following is my observations on the basis of technical analysis for the cities you mentioned on the post:

Your question about Houston: It is a tricky market and long term technicals are still not verified. However short term looks good

Question about Dallas: It is a market going good for a quite bit time. But long term technicals are still not verified. However short term looks good

Oklahoma city: Good for short term, however last three quarters are iffy on technical basis

Kansas city, MO: Short term technical basis for four quarters looked good and last two quarters started looking good since last two quarters

Raleigh (NC) : All short terms technical looking good for at least one year, however mixed signals for the current quarters for long term and red signals for last three quarters for long term technical.

Scranton (PA) : All short term and long term technicals are favoring this city for at least last four quarters, which is a pre-requisite for wealth building phase. In short, this is one of our favorite city on our list on our web site. The wealth building criteria also includes at least three percent price increase on long term basis and must be in line with National, State and Regional basis.

Note:

You may want to contact the Department of Labor and Chamber of Commerce in the above cities to verify the job growth. If both technicals and fundamentals are in line with each other and you recognize the characteristics in to the desired cities, you are in right direction.

Hopefully, the above explanation, may help you little bit. Let me know, if you have further questions.

Peter Dalal

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