Taking Bets on Highest Appreciating Major Markets in the Next 5 Years

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Taking Bets on Highest Appreciating Major Markets in the Next 5 Years

Robert Rixer
Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes

As I'm only truly exposed to my local market, I'm curious what people think is the most undervalued major market at the moment compared to 5 years from now and WHY. 

Keep it to the top 30 major metro markets (Austin is 30th, so nothing smaller), here is the full list. https://www.thoughtco.com/largest-metropolitan-areas-1435135. Providing BP doesn't go out of business, it will be interesting to look back on this in 2029 and see who was right/closest.

Personally, I think it's easy to go with Florida or Texas city, but they appear to already have a lot of the near term appreciation built in to today's prices. I'm going to go with a dark horse and say Minneapolis-St Paul. My reasoning is Midwest cities are often overlooked, downtown hasn't fully recovered from 2020 yet and it quietly has a lot of new construction, expanding suburbs and has major corporate headquarters (Target, Best Buy, 3M).


P.S. I'm a cash-flow investor not a speculator so this is purely academic

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Cassidy BurnsBusiness Member
Investor · Alexandria, VA · Member since 2016 · 859 posts · 460 votes
2y

We are buying in Washington DC, Northern Virginia, and Charleston SC for appreciation.  Single Family Homes in particular. 

[email protected]540-960-1507
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  • Joshua ChristensenPro Member
    Real Estate Broker · Albuquerque, NM · Member since 2015 · 281 posts · 232 votes
    2y

    Robert, this is a great question.  It's is incomplete as we don't know what type of appreciation you are looking for.  Every market has opportunity in the right places with the right deals.

    1-4 units follow the market appreciation through sales comps. 

    5+ units you start getting into forced appreciation through NOI approach.

    In either case, I'd be looking at markets with a growing population (demand), a shortage of inventory (supply), and a market that has a net positive importing of jobs with wage growth.

    As the Fed's a poised to make some moves with interest rates later this year, the question still remains to be seen what they will do with their QE/QT policy on their balance sheet as that will affect long term 1-4 unit rates.  Commercial rates will follow as they lower their overnight rates as SOFR usually tends to follow.  We're already starting see more of the sideline private equity entering the market again which will help rates.

    To pick the right market, you need clarity on your strategy. Value Add, Yield, BRRRR, STR, LTR...Every market has something to offer if you look. This question is a bit broad in scope. IMO.

    1Reply
  • Robert Rixer
    OP
    Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
    2y
    Quote from @Joshua Christensen:

    Robert, this is a great question.  It's is incomplete as we don't know what type of appreciation you are looking for.  Every market has opportunity in the right places with the right deals.

    1-4 units follow the market appreciation through sales comps. 

    5+ units you start getting into forced appreciation through NOI approach.

    In either case, I'd be looking at markets with a growing population (demand), a shortage of inventory (supply), and a market that has a net positive importing of jobs with wage growth.

    As the Fed's a poised to make some moves with interest rates later this year, the question still remains to be seen what they will do with their QE/QT policy on their balance sheet as that will affect long term 1-4 unit rates.  Commercial rates will follow as they lower their overnight rates as SOFR usually tends to follow.  We're already starting see more of the sideline private equity entering the market again which will help rates.

    To pick the right market, you need clarity on your strategy. Value Add, Yield, BRRRR, STR, LTR...Every market has something to offer if you look. This question is a bit broad in scope. IMO.

    My friend, you're overthinking it. Which market is going to be highest in value in 5 years compared to its value today? That's all I'm asking
    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y

    Charleston SC and surrounding burbs. 

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    2Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    2y

    @Robert Rixer what worries me about MSP is rent control, unfriendly business policies and no real large corporate growth. All of their fortune 500 companies seem to have business models that will have trouble sustaining any real growth against new tech. I'm very cautious against states with unfriendly landlord laws.

    [email protected]512-888-9122
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  • Cassidy BurnsBusiness Member
    Investor · Alexandria, VA · Member since 2016 · 859 posts · 460 votes
    2y

    We are buying in Washington DC, Northern Virginia, and Charleston SC for appreciation.  Single Family Homes in particular. 

    [email protected]540-960-1507
    3Reply
  • Robert Rixer
    OP
    Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
    2y
    Quote from @Jordan Moorhead:

    @Robert Rixer what worries me about MSP is rent control, unfriendly business policies and no real large corporate growth. All of their fortune 500 companies seem to have business models that will have trouble sustaining any real growth against new tech. I'm very cautious against states with unfriendly landlord laws.


    Yes very fair point. As much as I hate it, the answer could really boil down to politics. Who is going to be in charge at the state and local level and how do they compare to competitor markets.

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    2y
    Quote from @Jordan Moorhead:

    @Robert Rixer what worries me about MSP is rent control, unfriendly business policies and no real large corporate growth. All of their fortune 500 companies seem to have business models that will have trouble sustaining any real growth against new tech. I'm very cautious against states with unfriendly landlord laws.


     Rent control leads to higher prices as it creates housing shortages

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  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    2y

    The cities and states where people are moving. But there may be some changes in that over the next couple years as some hot cities cool down.

    1Reply
  • Robert Rixer
    OP
    Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
    2y
    Quote from @Eric James:

    The cities and states where people are moving. But there may be some changes in that over the next couple years as some hot cities cool down.


    Agreed. To add to that, where high income people are moving. But that is generally one in the same as people who move state tend to be of higher income anyway.

    1Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y
    Quote from @Robert Rixer:

    As I'm only truly exposed to my local market, I'm curious what people think is the most undervalued major market at the moment compared to 5 years from now and WHY. 

    Keep it to the top 30 major metro markets (Austin is 30th, so nothing smaller), here is the full list. https://www.thoughtco.com/largest-metropolitan-areas-1435135. Providing BP doesn't go out of business, it will be interesting to look back on this in 2029 and see who was right/closest.

    Personally, I think it's easy to go with Florida or Texas city, but they appear to already have a lot of the near term appreciation built in to today's prices. I'm going to go with a dark horse and say Minneapolis-St Paul. My reasoning is Midwest cities are often overlooked, downtown hasn't fully recovered from 2020 yet and it quietly has a lot of new construction, expanding suburbs and has major corporate headquarters (Target, Best Buy, 3M).


    P.S. I'm a cash-flow investor not a speculator so this is purely academic


     By percent or by absolute value?

    Let's do it against June 2029. So 5 years + 3 months. If we have to use that list, that's fine but I feel there are some other bigger-ish metros excluded like Nashville, Raleigh, etc.

    3Reply
  • Robert Rixer
    OP
    Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
    2y
    Quote from @V.G Jason:
    Quote from @Robert Rixer:

    As I'm only truly exposed to my local market, I'm curious what people think is the most undervalued major market at the moment compared to 5 years from now and WHY. 

    Keep it to the top 30 major metro markets (Austin is 30th, so nothing smaller), here is the full list. https://www.thoughtco.com/largest-metropolitan-areas-1435135. Providing BP doesn't go out of business, it will be interesting to look back on this in 2029 and see who was right/closest.

    Personally, I think it's easy to go with Florida or Texas city, but they appear to already have a lot of the near term appreciation built in to today's prices. I'm going to go with a dark horse and say Minneapolis-St Paul. My reasoning is Midwest cities are often overlooked, downtown hasn't fully recovered from 2020 yet and it quietly has a lot of new construction, expanding suburbs and has major corporate headquarters (Target, Best Buy, 3M).


    P.S. I'm a cash-flow investor not a speculator so this is purely academic


     By percent or by absolute value?

    Let's do it against June 2029. So 5 years + 3 months. If we have to use that list, that's fine but I feel there are some other bigger-ish metros excluded like Nashville, Raleigh, etc.


    Fair points - I am saying percent value.

    And sure thing on including Nashville on Nashville and Raleigh. I'm not married to the list, I was more trying to prevent people saying small towns like Fayetteville, NC or Huntsville, AL. Actually surprised Nashville isn't on that list.

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    Then, I'll go with

    San Antonio

    Charleston

    Raleigh

    Nashville

    Pittsburgh

    1Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    2y
    Quote from @Russell Brazil:
    Quote from @Jordan Moorhead:

    @Robert Rixer what worries me about MSP is rent control, unfriendly business policies and no real large corporate growth. All of their fortune 500 companies seem to have business models that will have trouble sustaining any real growth against new tech. I'm very cautious against states with unfriendly landlord laws.


     Rent control leads to higher prices as it creates housing shortages


     I've seen that because fewer people will give up their housing and fewer will be built. It seems like a dramatic failure to me.

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
    WebsiteView Page
    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Jordan Moorhead:
    Quote from @Russell Brazil:
    Quote from @Jordan Moorhead:

    @Robert Rixer what worries me about MSP is rent control, unfriendly business policies and no real large corporate growth. All of their fortune 500 companies seem to have business models that will have trouble sustaining any real growth against new tech. I'm very cautious against states with unfriendly landlord laws.


     Rent control leads to higher prices as it creates housing shortages


     I've seen that because fewer people will give up their housing and fewer will be built. It seems like a dramatic failure to me.


    what I have seen is landlords in markets were houses actually sell for a lot to retail buyers they just sell them and take the rentals out of production..
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    JLH Capital Partners51 Review
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    2Reply
  • Forest Wu
    Member since 2023 · 72 posts · 44 votes
    2y

    Midwest is always good (e.g., Milwaukee, Indianapolis)

    1Reply
  • Jacob Pereira
    Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes
    2y

    San Antonio seems like a shoe-in. Yes, it's appreciated some from the Texas swell, but it's still very undervalued compared to the other 3 Texas cities, yet enjoys many similar advantages. I think Charleston is also a good bet, with St. Louis being a dark horse, simply because of the potential upside.

    1Reply
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