I agree that investing in your own backyard makes it easy to find the best deals, but investing in a place like Ferguson, even for people that live there, isn't likely to be a profitable choice.
I don't see San Francisco appreciating in value much more. Affordability is an issue and the only people that can afford property are part of the tech community. I believe property values are near the peak of this market.
I wrote an article on which market is likely the best place to purchase real estate in 2016 and why.
Here it is, copied from my website.
Which Major United States Real Estate Market Will Increase In Value The Most By The End Of 2016?
Throughout the entire United States real estate market, property values are expected to increase an average of 4-5% in 2016, according to Corelogic.[i] While the market as a whole is moving in a positive direction, motivated real estate investors are generally looking for more than a 5% yearly return on their money. Those investors who are willing to search for some of the smaller, profitable real estate markets, many of them based in Arizona and Texas,[ii] should find that these areas increase in value more than 10% during 2016. However, that is not the scope of this article and is generally not in the range of a typical real estate investor’s risk profile. Which market, of the top 20 real estate markets in the US, will see its median property values increase to the greatest degree in 2016?
Is it going to be Denver? San Francisco? Or Austin? Let me get the smudges off my crystal ball from the last time I used it in 2015 and bought bitcoin before it jumped in value.
When predicting which real estate market will increase in value to the greatest degree in 2016, it is imperative to look at certain factors that contribute to an increase in overall demand. These factors include, population growth, economic expansion, and real estate affordability.
Real Estate Affordability
When taking real estate affordability into account, crossing San Francisco and Denver off the list immediately is the likely the right choice. Both San Francisco and Denver boomed in value over the last couple of years and real estate investors who didn’t jump onto the train at that time shouldn’t make an attempt to do so now. In San Francisco specifically, what does $1 million buy you? A loaf of hearty wheat bread, a shack in the Bay View District, and that’s about it.
When looking at Denver, it still has some potential for property value improvements, and commercial rental property is still a strong choice for those who don’t have a problem hosting a marijuana growing operation. Overall though, how much higher can property values go? In my opinion, those who invest in Denver in 2016 take on too much risk, without receiving enough in return.
All in all, expect both the Denver and San Francisco real estate markets to correct themselves throughout the next couple of years, as everyday people aren’t able to afford real estate here.
Population Growth And Economic Expansion
Since population growth and job growth go hand-in-hand, it is important to analyze these two factors in a correlated manner.
At the current time, the fastest-growing real estate market in both categories is Dallas/Fort Worth, TX. Coming in second place is Austin, TX. Charlotte, Seattle, and Atlanta round out the remaining top five fastest growing real estate markets.[iii] Since people are moving into these five cities faster than anywhere else in the nation, an investment in any of these locations should be a profitable choice.
Which City Is The Best Location For A Real Estate Investment In 2016?
Investments located in Texas can be seen as risky in 2016, as the entire state economy is tied directly with the price of petroleum, even though Texas economic representatives try to claim otherwise. As petroleum prices sink to newly tested lows, expect the trickle-down effect to take a toll on the cities in Texas, Oklahoma, North Dakota, and fracking states, like Ohio.
While Charlotte and Atlanta are both good investment locations in 2016, I believe it is safe to say that Seattle is going to take the cake in 2016. With a strong tech sector, plenty of foreign investments, and a diverse industry overall, demand for the city of Seattle is likely to be second to none in 2016.
Seattle has been in a solid upward trend since 2012 and is likely to continue its ascent.[iv] While there are certain analysts screaming the “B” word,[v] I just don’t see this market witnessing unsustainable growth. Since an economic boom is just getting started in Seattle, I believe that already high property values will continue to progress higher.
Seattle Rental Property – Safe, Yet Profitable In 2016 And Beyond
The most logical real estate investment in 2016 appears to be Seattle rental property, as investors should be able to capitalize fully on property appreciation and increasing positive cash flow, without taking on much risk.
[i] World Property Journal,. “Corelogic Releases 2016 U.S. Housing Market Predictions”. N.p., 2016. Web. 11 Feb. 2016.
[ii] Insider Monkey,. “15 Fastest Growing US Cities Ranked By Population Growth”. N.p., 2016. Web. 11 Feb. 2016.
[iii] Riggs, Trisha. “Emerging Trends: Dallas/Fort Worth And Austin Are Top U.S. Cities For 2016 – Urban Land Magazine”. Urban Land Magazine. N.p., 2015. Web. 11 Feb. 2016.
[iv] Trulia.com,. “Real Estate Market Trends For Seattle, WA – Trulia”. N.p., 2016. Web. 11 Feb. 2016.
[v] Puget Sound Business Journal,. “Bubble Trouble: Many Experts Say Seattle Housing Market Is Headed For A Fall – Puget Sound Business Journal”. N.p., 2016. Web. 11 Feb. 2016.
