How can you tell if your own city is in need of residential redevelopment?
Residential redevelopers, otherwise known as real estate investors, are always on the lookout for up-and-coming neighborhoods in lucrative markets. These emerging areas are typically comprised of relatively low housing costs, low unemployment rates, rising home prices and appreciation rates, and the presence of major companies. In most cases, this marriage of traits has a tendency to create a profitable environment for those interested in residential redevelopment.
As the U.S. real estate market continues to make considerable gains, the apple of every investor’s eye is now residential redevelopment. If for nothing else, these trendy communities represent a rare opportunity for savvy investors to buy low, sell fast, and earn healthy returns in the process. The following reveals the top 10 housing markets in need of residential redevelopment:
Top 10 Housing Markets For Residential Redevelopment
In order to take advantage of residential redevelopment, investors need to understand how to identify when an area is poised for growth. Promising housing markets will generally display certain elements investors should be aware of, and they include:
- Job growth is rising/unemployment is dropping
- Homes selling faster than normal
- Crime rates going down
- Schools are improving
- New home construction is growing
- Popular businesses are moving to the area
- City development projects are on the rise
- Walkability
Another factor to consider when identifying residential redevelopment areas are millennial homebuyers (those 18-34 years of age), which are quickly becoming a large portion of homebuyers in America. Millennials made up 35 percent of homebuyers in 2015, according to the National Association of Realtors (NAR), and that number is expected to skyrocket in the coming years.
In terms of residential development, the following real estate markets are forecasted to produce big money for investors and homeowners in the next few years:
10. Minneapolis, Minnesota
As one of the top 10 purchase markets for millennial homebuyers, the Minneapolis real estate market is booming in 2016. The median home price for Minneapolis real estate during the second quarter of 2016 was $242,400; compared to the national average of $239,167. In addition, homes in Minneapolis appreciated at an impressive one-year rate of 6.3 percent, as opposed to the national average of 4.9 percent. Three-year appreciation rates, on the other hand, ballooned to 22.4 percent, compared to 17.8 percent the rest of the country saw.
Along with rising home prices and appreciation rates, the Minneapolis housing market remains one of the more affordable in the nation. Minneapolis real estate investors and homeowners paid 9.2 percent of their income to mortgage payments in the second quarter of 2016, whereas the national average paid 15.8 percent.
Lastly, the local economy in Minnesota continues to improve in 2016, which bodes very well for investors. The unemployment rate for Minneapolis during the second quarter was 3.7 percent, compared to the national average of 4.9 percent. Although local employment growth remains slow, employment has held up and is on the upward trend.
9. Chicago, Illinois
After years of decline, the Chicago real estate market has slowly become one of the top destinations for homebuyers and investors alike. A plethora of job growth in recent years, combined with low home affordability, has kickstarted the Chicago housing market into one of the hottest markets in recent years.
One of the more popular neighborhoods in Chicago is the Ukrainian Village. This emerging community, which combines nostalgic charm with modern trends, is home to some of Chicago’s hottest restaurants and bars, and is within walking distance of all the amenities homeowners would want.
Although local employment is poor in Chicago, the economy continues to improve with each passing quarter. That said, the median home price for Chicago real estate remains competitive with the national average, and appreciation rates continue to outperform. The median home price for Chicago real estate during the second quarter of 2016 was $246,400; opposed to the national average of $239,167. One-year and three-year appreciation rates were 6.9 percent and 22.4 percent respectively. This combination of factors is ideal for investors looking to take advantage of residential redevelopment areas.
8. Las Vegas, Nevada
Despite being a poster child for the real estate bust in 2006, Sin City continues to produce some of the best residential redevelopment areas for investors in 2016. The second quarter saw home prices for the Las Vegas real estate market surpass the national average, with prices reaching $242,300 compared to the rest of the country of $239,167. In addition, the one-year appreciation rate for the Las Vegas real estate market was 12 percent during Q2, while the rest of the country saw homes appreciate at 4.9 percent. In addition, appreciation rates increased dramatically during the year three, which saw equity gains surge 41 percent, compared with the national average of 17.8. With huge gains in property values, accompanied by strong rental demand and low home affordability, the Las Vegas real estate market is quickly becoming a paradise for residential redevelopment.
One of the many boom towns in close proximity to Las Vegas is known as Mountain’s Edge. Situated in Southwest Las Vegas, and surrounded by a natural desert and mountain landscape, this up-and-coming community is expected to see 19.4 percent household growth over the next five years.
7. Austin, Texas
The Texas real estate market has become a haven for residential redevelopment, as three of the top 10 housing markets are based in Texas. Thanks to a combination of factors like, younger homebuyers, a booming nightlife and music scene, along with a growing presence from larger corporations, including venture capitalist, the city of Austin continues to be one of the more attractive real estate markets for investors in 2016.
The second quarter saw the median home price for Austin real estate reach $289,100; compared to the national average of $239,167. Additionally, appreciation rates continue to outpace the rest of the country, as the Austin real estate market accrued one-year appreciation rates of 6.7 percent, and 25.2 percent for three-year rates. Price appreciation and principle payments in the last three years have boosted total equity growth for Austin since the recession.
Another factor investors need to consider, in terms of residential redevelopment, is home affordability. While historically strong, homeowners in Austin paid 12.3 percent of their income to mortgage payments, compared to the national average that paid 15.8 percent. Along with affordability, new housing construction in on the rise, which bodes well for upcoming real estate investments. The current level of construction in Austin is 46.3 percent above the long-term average, while single-family housing permits increased 4.9 percent.
Moving forward, the Austin real estate market should continue to be a hotspot for investors and homeowners. One neighborhood investors should pay special attention to is Hyde Park, as a blend of public transit, affordability and charm makes this area one of the hottest neighborhoods in 2016.
“Hyde Park is a quiet, tree-lined neighborhood with a mix of modern and classic Craftsman homes that suit many types of buyers,” Redfin agent Andrew Vallejo said. “It has always been a popular neighborhood, but it has become even more competitive over the last few years due to the revitalization of the surrounding area. Austin’s community college system recently purchased a nearby vacant mall and has developed a portion of the complex into a new campus, and will develop the remaining portion into private mixed-use space.”
6. Raleigh, North Carolina
Another growing residential redevelopment area primed for investment opportunity is the Raleigh real estate market. This promising community has not only become a hotbed for technology and business development, but it’s one of the more reasonably priced and affordable housing markets in the U.S.
The median home price for Raleigh real estate was $258,800 during the second quarter of 2016, compared to the national average of $239,167, while appreciation rates grew faster than the rest of the country. Although one-year appreciation rates were slower for homes in Raleigh than the national average (4.4 percent compared to 4.9 percent), equity gains during the third year greatly surpassed the rest of the nation, as three-year appreciation rates increased to 30.2 percent, as opposed to 17.8 percent.
The local economy in Raleigh remains strong, as unemployment and job growth rates are outpacing the national average. The unemployment rate in Raleigh was 4.4 percent during the second quarter, compared to the national average of 4.9 percent, while job growth rose 3.1 percent.
5. Atlanta, Georgia
Ever since the recession the Atlanta real estate market has been one of the hottest residential redevelopment areas in the country. Home prices and appreciation rates continue to rival the national average, while home affordability and the local economy remain far better than the rest of the country.
The median home price for Atlanta real estate was $192,000 during the second quarter of 2016, compared to the national average of 239,167. Appreciation rates for homes in Atlanta grew at a one-year rate of 5.8 percent, while three-year equity gains soared to 34 percent. More importantly, the local economy has been strong compared to other markets during the second quarter, and should continue in 2016 and beyond.
4. Houston, Texas
In terms of residential redevelopment, no place offers more potential to investors than the Houston real estate market. Along with decent returns from home prices and appreciation rates, the Houston real estate continues to showcase all the characteristics of an up-and-coming residential redevelopment area, including home affordability, improving economy, and new housing construction.
3. Miami, Florida
The Miami real estate market has long been an investor’s paradise, as the area has enjoyed an array of highs and lows in recent years. That said, Miami is one of the top residential redevelopment financing markets in 2016, thanks to a combination of factors like, rising home prices and appreciation rates, an improving economy, and an increase in new housing construction.
Along with attracting an onslaught of tech entrepreneurs, including a key number of startups in recent years, job growth in Miami is getting stronger. According to the NAR, Miami’s one-year job growth was 2.7 percent during the second quarter, while the national average saw gains of 1.9 percent. Although unemployment rates lag behind the national average, the local employment growth in Miami is similar to the Jacksonville real estate market, and should continue on an upward trend in 2016.
2. Denver, Colorado
Along with being one of the top 10 purchase markets for millennial homebuyers, the Denver real estate market continues to be one of the hottest housing markets overall in 2016, especially for residential redevelopment
The Denver real estate market enjoyed remarkable equity gains in the second quarter of 2016. In fact, equity gains for Denver real estate in the last three years has more than double the national average, growing to 41.3 percent compared to 22.6 percent demonstrated by the rest of the country.
Along with skyrocketing home prices and appreciation rates, the Denver real estate market continues to benefit from the local economy. The unemployment rate during the second quarter was 3.3 percent, while one-year job growth climbed to 3.1 percent–both of which are better than the national average. Another positive for Denver real estate investors is home affordability. The Mile High city continues to be one of the more affordable markets in the nation, as homeowners paid 13.9 percent of their income to mortgage payments during the second quarter, while the rest of the country paid 14.5 percent.
1. Dallas, Texas
The Dallas real estate market takes the cake as the top destination for residential redevelopment. As a commercial and cultural hub of Texas, this thriving community is home to a slew of sporting teams, as well as a growing nightlife, and continues to witness smaller neighboring cities popping up.
While the median home price for Dallas real estate was slightly lower than the national average, $232,200 compared to $239,167, the city made up for it big time in terms of total equity gains. Homes in the Dallas market appreciated at a rate of 9.1 percent during Q2, whereas the rest of country saw gains of 6.1 percent. Along with rising home prices and appreciation rates, home affordability continues to be a staple of the Dallas real estate market. Homeowners paid 9.4 percent of their income to mortgage payments during the second quarter, while the national average paid a whopping 15.8 percent.
Another component to consider when investing in Dallas real estate is new housing construction. According to the NAR, the current level of new housing construction in Dallas is 51.8 percent above the long-term average, with single-family housing permits rising 8.6 percent, as opposed to the rest of the country at 10.6 percent.
