Spring has traditionally been the most popular time to buy and sell real estate. While investing in the big cities like New York City, San Francisco, and Washington, D.C. may be getting a little over heated, there are still some good opportunities out there if you where to look.
The three hottest places to buy a home right now are:
Dallas/Fort Worth, TX
Dallas, TX is undiscovered in this market. In the Dallas/Fort Worth are, there is a significant number of properties that are “underwater,” meaning the homeowners owe the bank more money than what the home is actually worth.
Shari Olefson, Real estate expert and author, said, “In markets like Dallas and Fort Worth, you still have anywhere between 20% and 40% of homeowners with a mortgage that are underwater. We are also looking for areas where the income is in line with the home value. So you never really want to be paying more for a home than about two and a half times what the area median incomes are.”
In areas like Dallas and Fort Worth, there are a lot of homeowners with underwater mortgages.
San Bernardino, CA
San Bernardino, CA has the same factors as Dallas/Fort Worth, TX. The other thing that works for San Bernardino is that the rents are a little more on the high side. This is when knowing more about rental income is important because the rule of thumb in it is the cap rate. The formula goes like this: you look at the annual amount of rental income annual and you divide that by what you’re going to have to invest in the house.
“That formula works out well in San Bernardino not so much because the home values are excessively low, but because they’re getting good rents there,” said Olefson.
So for example, when investors are looking to buy homes, the median amount that they pay now is about $195,000 for those exact reasons. The investors want to make sure that they are paying under what the median of income will support for the value of the home. They also want to make sure that they are paying a small enough amount that their cap rate in the rental agreement is going to be high enough.
Florida
The Sunshine State has some good deals on its way in respect to the housing market, specifically in three cities – Jacksonville, Orlando/Tampa, and Miami. Florida is a judicial state and also a home to all of those infamous robo-signer cases. The state of Florida took a hard hit by that crisis.
Olefson uses Jacksonville as an example of the effects of the robo-signer housing chaos. She stated that 40% of the homes in Jacksonville have mortgages that are underwater which is huge. “Because of that, you’re seeing higher levels of inventory. When there’s more homes available, it’s just supply and demand. It tends to drive down prices.” She notes that in the Jacksonville area, you can purchase a home for about $100,000 and you can rent it out for about $1,200 to $1,300 a month, and the numbers will look great.
When you’re looking for idea areas to purchase in Delray Beach, you want to look for factors such as negative equity, inventory, and the number of foreclosures and faults that are still in the pipeline. The other factor you want to keep an eye on is jobs and colleges that are around the area. College students may be able to rent or buy a home from you. Population growth as well as job and wage growth are a big factor in terms of appreciation and why home appreciation is slowing down.
Olefson’s comments on this subject were, “We’re not looking as much at making money because of huge appreciation in general in the market. We’re looking at making money because those assets are still undervalued because of the crisis the rest of the nation has recovered from, but these areas have not.”
Ace Mortgage Loan Corporation is a mortgage company in South Florida that can help you with the process of purchasing a home. Our home financing professionals can assist you will applying for a FHA, Fannie Mae, or VA loan. Our mortgage services are available to those in Coral Springs, Coconut Creek, Boca Raton, Pompano Beach, Plantation, Delray Beach, and Davie. Call us today.