Here Are The Most Overvalued And Undervalued Housing Markets

[Engelo Rumora]

Hi everyone,

I haven't started a topic in too long so I hope no one beat me to this article lol

I'm pretty sure my fellow investors from Ohio will appreciate this one :)

http://www.businessinsider.com/over-and-undervalue...

Thanks for reading and have a great day.

[Tim E.]

Cleveland can be a tough nut to crack.  I certainly wouldn't disagree with the "under-valued" status.  I whole heartedly believe that.  I'm actually thinking of taking the plunge myself - my old stomping grounds.  But to be perfectly honest, I have some concerns when I read that Cayahoga County (Cleveland) has been bleeding population year over year.

[Engelo Rumora]

Originally posted by @Tim E.:

Cleveland can be a tough nut to crack.  I certainly wouldn't disagree with the "under-valued" status.  I whole heartedly believe that.  I'm actually thinking of taking the plunge myself - my old stomping grounds.  But to be perfectly honest, I have some concerns when I read that Cayahoga County (Cleveland) has been bleeding population year over year.

Thanks for your comment Tim,

Ohio is a very undervalued and some of the deals we come across in Toledo and Dayton are unbelievable at times.

Michigan is another market that has great potential IMO.

I'm not worried about the "declining" population or "high" unemployment that is always pumped by the media. It will just give the more experienced investors extra time to jump on board and buy up all the bargains.

There are certain zip codes in these cities that have such a high demand that there is actually a shortage of supply.

All these figure come to nothing anyway unless you work with a great group of people that can assist in the process of investing.

Thanks and have a great day.

[James Wise]

Agree with @Engelo Rumora on a micro level the rental housing demand I'm seeing is enough to keep me dipping back into the well.

[Rubina Begam]

Nice Article... keep posting

[Christian Carson]

Declining population is kind of a moot point everywhere except perhaps Detroit. The Cleveland metro population is only down about 8% from its 1960 peak. Over that 54-year period, that means the population is declining on average 0.1% per year. That isn't enough to start sounding alarm bells and it certainly isn't enough to cause a disturbance of the equilibrium that we see in Detroit on the low end or California on the high end. Nobody's being taken to the woodshed here.

[Trevor Ewen]

Noticed Providence on the list. Never thought about it much, but it is 3 hours from my home. Any thoughts Providence people?

[Anthony Thompson]

Trevor, someone from NY asked about Rhode Island here on BP a few weeks ago and there were some good responses: http://beta.biggerpockets.com/forums/25/topics/131864-bp-thoughts-on-rhode-island

[Karen Margrave]

LOCATION, LOCATION, LOCATION is what drives demand, and llimited supply creates rising prices. Orange County has an unemployment rate of 4-5%, high income wage earners, educated work force, broad based economy, universities, medical centers, amusement parks, event venues, major league sports, and miles and miles of beautiful, accessible beaches. Add to that it is one of a few conservative counties in the state with a solid financial foundation, and you'll understand why it's so popular. Plus we have perfect year round weather, and every major airline flies in here.  California may be known for the lliberals running the zoo, but, there's no other place like California. 

[Anthony Gayden]

Originally posted by @Karen Margrave:

LOCATION, LOCATION, LOCATION is what drives demand, and llimited supply creates rising prices. Orange County has an unemployment rate of 4-5%, high income wage earners, educated work force, broad based economy, universities, medical centers, amusement parks, event venues, major league sports, and miles and miles of beautiful, accessible beaches. Add to that it is one of a few conservative counties in the state with a solid financial foundation, and you'll understand why it's so popular. Plus we have perfect year round weather, and every major airline flies in here.  California may be known for the lliberals running the zoo, but, there's no other place like California. 

 That's great, but that doesn't mean that housing isn't overvalued. 

[Karen Margrave]

@Anthony Gayden  What exactly is the definition of "over valued"?   What is it based on? Orange County (as most areas) is made up of varying sub markets. The coastal areas have some of the highest valued real estate in the country, at the same time, it is home to centi millionaires and billionaires. yet other areas further inland have lower priced homes and wage earners. It's all relative. 

Nothing is ever as simple as all the articles that come out state. Every region, state, county, city and neighborhood have their own complexities; and making broad statements are great for headlines, but have little to do with real estate investors on the ground in their local markets. 

[Bill Larsen]

Great article!  I keep waiting for prices to dip again here in southern california and it keeps not happening

[Anthony Gayden]

Originally posted by @Karen Margrave:

@Anthony Gayden  What exactly is the definition of "over valued"?   What is it based on? Orange County (as most areas) is made up of varying sub markets. The coastal areas have some of the highest valued real estate in the country, at the same time, it is home to centi millionaires and billionaires. yet other areas further inland have lower priced homes and wage earners. It's all relative. 

Nothing is ever as simple as all the articles that come out state. Every region, state, county, city and neighborhood have their own complexities; and making broad statements are great for headlines, but have little to do with real estate investors on the ground in their local markets. 

I notice that in some areas, you can not rent a property for enough money to cover the mortgage payment. When there is that much of a disparity between home prices and rents, it leads me to believe that homes are overvalued.

The belief by many is that the market itself dictates a home's value, and I agree to a point. That point is when the market is being driven by home buyers and long term buy/hold investors. When the market is being driven by short term investors looking for big appreciation gains in a short time period, then the market can become artificially inflated, with the short term investors just selling to other short term investors in a nasty repeating cycle that drives up the price of real estate.

[Lewis Pollard]

People are nomadic, so I would't worry about the population of cities declining as much because they are more likely to move back to these same cities when the cost of living becomes much less than where they currently reside, in my opinion.

[Karen Margrave]

The belief by many is that the market itself dictates a home's value, and I agree to a point. That point is when the market is being driven by home buyers and long term buy/hold investors. When the market is being driven by short term investors looking for big appreciation gains in a short time period, then the market can become artificially inflated, with the short term investors just selling to other short term investors in a nasty repeating cycle that drives up the price of real estate.

I don't think you're going to find many "short term" investors looking for big appreciation gains in southern California and then reselling to other short term investors. I think the current demand is more a rush to get in on the market at the lowest price possible, knowing that historically due to the high demand in many areas, that prices will be going up, and staying up. 

 @Bill Larsen the prices in many areas, especially coastal cities, will probably never again be as low as they are today.

[Bill Larsen]

@Karen Margrave what data makes you think that the market will only go up from here?

[Tiffany Plovie]

@Bill Larsen  and @Karen Margrave 

     I agree with Karen. Orange County will not be subject to same level of market volatility as other areas due to the simple law of supply and demand. 

  It is geographically situated on a piece of land that is not only coastal, but easily accessible to one of the largest cities in the nation. It has excellent airline access, a temperate climate and a limited amount of space available. How many other places in the country can lay claim to the same attributes?

   The population desiring to live in OC will always outweigh the amount of housing that is readily available. Hence, more demand and higher prices.

[Karen Margrave]

@Bill Larsen  

Median Prices, Orange County up to 2008

Current Values

[Karen Margrave]

@Lewis Pollard  Once again, markets are complex. The fact people used to live in an area doesn't necessarily mean that area will once again thrive.  Local economies have been completely wiped out in many areas, and unless some other businesses rise up to replace the income for the area, people will not be able to afford to live, and move. 

There are other communities that are considered bedroom communities, where people move to that are on the outskirts of large cities where real estate is just not affordable. These communities do great in good markets. However; when something like gas prices skyrocket, the cost of driving the distance to those outlying areas then doesn't make as much sense as paying higher rents with the populated areas. 

There's so much that goes into market values, and it's important to understand that in order to evaluate properties. 

@Anthony Gayden  The fact someone can or cannot pay their mortgage from the rents depends on how much they put down on the property to begin with, and the balance owed on the loans. Investors all have different things they are looking at, be it cash flow, appreciation, buying a property to retire to etc. There's many factors people consider for their specific situation, as well as types of properties. That's what is so great about this business, there's no set formula for success. 

[Bill Larsen]

@Karen Margrave I agree that over time, prices will rise.  But to think they'll never be as low as they are today seems hard to believe.  They could be lower than they are today in the fall!  But who knows... I've never seen a time when a year of appreciation like last year was followed up with a leveling off.  In past cycles, the appreciating markets have been followed by some drop in values.  

[Amit M.]

@Karen Margrave  comments

+1

[Karen Margrave]

@Bill Larsen Note:  I said they "probably never" will be lower than they are right now, and I further mentioned specifically the "coastal areas" of Orange County. Those areas ae always the highest in demand, and the prices now are still low compared to the high point pre crash. However; only time will tell.