Post-Recession Commercial Real Estate
7 Cities That Are in Post-RecessionÂ
Between 2012 and 2013 the top five housing markets rose by more than 20%, according to recent data from real estate listing website Zillow. This compares to only 5.1% across the United States as a whole. Certain cities in the United States have recovered strongly after the recent recession, while others continue to struggle. To help you pick the winners from the losers here are seven cities that are expected to offer above market returns.
Las Vegas was one of the clear winners during the real estate boom, but it was also one of the hardest hit during the crash. As the overall economy recovers and Americans start traveling again, Las Vegas is leading the US real estate market once again. Figures from real estate provider Clear Capital show that Las Vegas housing prices increased by 31.2%, making Las Vegas the first metropolitan market to break through the 30% yearly growth make. Demand is one of the reasons that Las Vegas is growing and relatively cheap housing is also another factor. The median house price for houses in Las Vegas is $145,000. Another element playing in Las Vegas favor is historically low interest rates. Many buyers in Las Vegas are able to finance their new home purchases with interest rates as low as 4%. This has led to strong demand by local residents for a limited inventory of available properties.
Phoenix was another city that was very hard hit during the recent real estate crash. Between 2006 and 2011 property prices fell by an average of 55%. A large part of this was due to the over supply. During 2005 house builders in Phoenix were constructing 4,000 homes a month. However Phoenix has also been one of the cities that have recovered most quickly over the last two years. According to figures released by research firm CoreLogic housing prices in Phoenix increased by 22.9% in 2012. This has lead to a new building boom as developers grab up available land for subdivisions. This building boom seems sustainable due to two key factors population and job growth. In 2012 the number of jobs in Phoenix grew by 3% which is twice the national average. Supply is also helping to drive growth. After the crash new housing almost completely stopped in Phoenix. As prices dropped much of the available inventory was bought up by investors who are now renting out this property.
Detroit has become a synonymous with the decline in American manufacturing and its effect on once great cities. But in much the same way as there has been resurgence in industry across the United States, so too are Detroitâ€™s fortunes rebounding. House prices in Detroit are still very cheap compared to most parts of the country. In the city you can literally buy a house for less than the price of a car produced in one of Detroitâ€™s factories. According to Trulio the median house price in 2013 was just over $51,000. However these low prices have also made it easier for prices in Detroit to post strong gains as the overall economy picks up. According to the Standard and Poorâ€™s Schiller index house prices in Detroit metro increased by 18.5% in the year to March 2013.
Of the major cities Houston has been one of the fastest to recover from the recent recession. In the past Houston has been considered to be a volatile market for real estate investment because of itâ€™s perceived over reliance on energy. However,since 1980â€™s Houston has taken on a much more conservative approach to lending. This meant that many real estate investors have been able to weather the storm relatively well during the turn down in the real estate market. As the overall economy grows and energy demands increase, Houstonâ€™s local economy is expected to perform well. With an unemployment rate of only 6.1%, Houston has a strong demand for rental properties.
Sacramento has been referred by some as the new Phoenix. Like Phoenix prices plunged during the recent crash to rock bottom prices. However like Phoenix it seems that Sacramento will also lead the market back up. One of the main factors contributing to the sharp rise in Sacramento houses prices is a lack of inventory. Following the real estate crash there was very little new development in Sacramento. In 2012 Sacramento also saw the largest number of houses go off the market in the United States. This reduced available inventory by about two thirds. While housing prices are rapidly rising in Sacramento they are still below their 2006 peaks. In some neighborhoods one out of every three houses remains in foreclosure. This makes Sacramento a market with still plenty of opportunity for bargain hunters.
If you are looking for a more stable market then you might want to consider Denver. The city did not experience the same drops as other parts of the country and so gains have not been as strong. HoweverDenver has produced some solid returns with the market up 10% in the year to May 2013, according to the Standard and Poorâ€™s Schiller Index. The most popular area in Denver is the Highlandsbut there has been strong demand across the city. Denver is one of only two cities (Dallas being the other) where house prices have actually topped those posted during the recent real estate boom. Low inventory and strong demand are at play here as more buyers are chasing relatively few homes. According to local real estate agents even houses in the $300K plus bracket are selling relatively quickly.
Foreclosures signs have been a common site in Portland in recent years, but that may be set to change as the local real estate market begins to pick up. In 2013 Portlandâ€™s available housing inventory declined by 23.5%. The average house prices are also up by 12%. Houses are staying on the market for a significantly shorter period of time. The average time houses stayed on the market dropped by 45% to 39 days. This compares very favorably against a national average of 83 days. These gains are underpinned by the strong growth in the local technology and energy industries. As with many parts of the country growth is also being driven by limited housing inventory.
The current real estate market offers great opportunity for investors who are willing to do their research. Many of the cities that were worst hit during the collapse of the real estate boom, are now rebounding strongly. In the years following the real estate crash development came to a virtual halt in most part of the country. Increasingly limited available inventory and demand rising in response to a growing economy will almost certainly lead to higher house prices in the future.