Top 1%
Five Long-Term Real Estate Picks
Jennifer Openshaw
03/09/07 - 01:40 PM EST
Like most Millionaire Zone investors, you invest long term. You like real estate because it has a solid long-term, fundamentals-based track record over the long haul.
So why does every real estate forecast you read only take you through the end of this year or 2008 at the latest? Short-term forecasts are nice -- especially if you're a real estate agent -- but as a real estate investor, I like to look at the longer term.
I know my crystal ball can't forecast interest rates much better than anyone else's. And that makes predicting specific prices say, 10 years down the road, a real stretch.
So I won't do that. But here's what I can do: I can predict which residential markets are most likely to see strong and sustainable growth over the next decade.
My crystal ball, which employs metro-area facts and figures I recently obtained from industry expert Bert Sperling, combines several factors across some 375 U.S. metro areas:
- Future job growth. To me, the long-term job picture is key to real estate and especially investment real estate growth. My picks have at least a 20% projected future job growth through 2010.
- Affordability. Picks should have modest prices relative to local incomes. I eliminated areas with median home prices more than five times median household incomes, and areas where median home prices exceed $250,000.
- Stability. It's hard to guess where boom-bust markets like Phoenix, Las Vegas, Houston and smaller markets like Texas border towns are going, so I disregarded them.
- Room to move. I want up-and-comers, not markets with the best days already behind them. Those appreciating more than 100% during the 2002-06 boom are out.
- Austin, Texas (median home price, or MHP, $176,700; future job growth, or FJG, 28.1%) As a real estate market, the solid Texas capital city has everything going its way -- steady state-government employment and tech-led private employment bursting at the seams. As if that weren't enough, it's also home to the University of Texas, and I'm a big fan of college-town real estate. There's lots to do and lots to attract people for a long time, with few downsides.
- Bend, Ore. (MHP $229,000; FJG 30.8%) Way up in the sagebrush plateau east of the Cascades -- but not too far east to enjoy the skiing -- is the booming and somewhat upscale enclave of Bend. There's lots of wealth here, lots more arriving and the job base isn't just tourism anymore. You may end up living in your investment someday when you retire.
- Fayetteville-Springdale-Rogers, Ark. (MHP $168,400; FJG 32.9%) Once a sleepy center mainly known for chickens and trucking, this booming area is sometimes just called Northwest Arkansas after its now busy airport. Of course, the elephant in the room lies in adjacent Bentonville in the form of Wal-Mart's (WMT Quote) world headquarters. Wal-Mart employs thousands, but the real story is the growing economic base of companies serving Wal-Mart's needs.
- Fort Collins-Loveland, Colo. (MHP $237,000; FJG 22.9%) This is another classic college town story (Colorado State University), but with a large and diverse commercial and technology base nearby. Students, professors, well-paid professionals and retirees from other parts of Colorado and elsewhere are drawn to The Fort and its sparkling Front Range vistas.
- Raleigh-Cary, N.C. (MHP $207,700; FJG 20.3%) This rapidly growing metro complex also includes the college and commercial centers of Durham and Chapel Hill. The economy has so many strengths it's hard to know where to begin. Sitting in the center is the impressive 7,000-acre Research Triangle Park, one of the world's most concentrated bases of applied and basic research with some 150 companies represented. The area is located halfway between the major East Coast markets and Florida and is picking up new residents from both, as the former retreat from crowding and high prices and the latter from hurricanes. The area is a solid bet.