I am still looking and comparing the Phoenix, Las Vegas and Dallas markets. I hope to look into Florida markets next month.
2 Key Economic Indicators to watch are Employment Growth and Population Growth:
ClarkCounty, Las Vegas: Population grew from 2011 to 2012 by 15,400 and projections for 2013 is 20,000
Job growth show a .47% increase in 2012 or 3800 jobs. Unable to find projections for 2013
Dallasand Fort Worth: Population grew from 2011 to 2012 by 56,160 or .85%
Job growth show a 2% increase in 2012 and projection for 2013 is 2 to 3%
Phoenixand its surrounding area: Population grew from 2011 to 2012 by 49,000 and projections for 2013 is 1.3%, 2014 is 1.4% and 2015 is 1.8%
Job growth show a 2.6% increase in 2012 or 43,700 jobs. Projections for 2013 is 49,300 jobs or 2.8%
Summary: Las Vegas doesn’t show enough new jobs or population to justify the increase in values the market has recently experienced due to the Large Hedge Funds and REIT’s that are buying up all the foreclosures. I am also reading that property values are still going down. This is mixed information. Are values going up or down? Its not clear, except we know that there are many foreclosures to come and its hard to buy them because we are competing with Corporate buyers that are willing to pay higher than anyone else.
The Dallas and Phoenix markets do have the new jobs and added population to justify the appreciation rates and rental increases the market is experiencing. We need to realize that in the areas in which the Corporate buyers are purchasing in mass quantity, those rents will suffer and decrease due to the available homes for lease. This is exactly what happened in 2004 through 2006 where investors over bought in some areas creating a soft rental market.
I still believe in making offers on short sale and foreclosed properties but only when you are completely ready to make a fast decision. We need to be the first to make the offer and it has to be high enough that the seller will take it before other offers come in. The Corporate buyers are willing to accept a 5% cash on cash return and I am trying to find you a 10% to 20% rate of return.
As the foreclosures dry up and housing becomes harder to buy, new homes will be the next phase of buying. This will drive up the values of new construction. Because home builders have suffered over the past few years from lack of sales, they have dropped their pricing to their bare minimum profit just to stay in business. I believe new homes are at their lowest price point and we will see those prices increase substantially over the next few years. I agree with Warren Buffett on this one – buy stock in home builders. They will reap large profits soon and their values will go up.
As homes sell, builders will continue looking for more land to build more homes. I believe land is an excellent opportunity and whether its buying an undeveloped home site that a builder lost to foreclosure or undeveloped land, we need to be looking for opportunities in land.
And of course, I have an incredible land opportunity which is attached to this email. I would love to discuss it further with you if you have an interest.