While it appears that U.S. housing has made a full recovery since the 2008 housing crash, it actually isn’t true for all U.S. markets. Some cities have redefined themselves since the Great Recession, others have recovered and comeback with even greater strength, and some areas continue to struggle with an oversupply of distressed, bank-owned homes.
Realtor.com analyzed the various markets and came up with a list of Top 10 Cities that have had the Biggest Comeback in U.S. Real Estate.
The analysts took the national housing crash in 2007 as their “ground zero” for housing and then began analyzing metro areas around the country to determine which markets had best recovered from the crash through the end of 2016. For us real estate investors, these comeback cities may offer opportunity for both equity growth and cash-flow .
Realtor.com columnist Yuqing (You King) Pan said, “We took the 150 biggest metros around the country, factored in their highest, pre-recession home-price heights, their lowest lows of the crash, and which ones rebounded the best.” She added that they measured recovery in terms of home prices, new home construction, foreclosure rates, unemployment rates, and local household incomes.
The group also excluded markets that they felt had not experienced sufficient “hardship” to make a “comeback” list. Austin, Texas, for example, did not even get to enter the competition. “Comparing the recovery in Austin with Las Vegas would be comparing apples to oranges – or maybe Craisins,” Pan said.
The group came up with a list of 10 comeback cities which are:
#1 – San Jose, California
#2 – San Francisco, California
#3 – Portland, Oregon
#4 – Grand Rapids, Michigan
#5 – Provo, Utah
#6 – Colorado Springs, Colorado
#7 – North Port, Florida
#8 – Charlotte, North Carolina
#9 – Boise, Idaho
#10 – Reno, Nevada
San Jose topped the list thanks to post-crash growth of 57 percent in combination with median home prices of $835,200, while number-10 Reno, Nevada, had post-crash growth of 77 percent but median home prices of “only” $300,100.
Oddly, when you talk to people from San Jose, they seem to forget this. I speak in the area often and many of Real Wealth Network members are from the Silicon Valley, and ll often hear them say that the Bay Area is immune to market fluctuations. I am astounded whenever I hear this.
I usually reply saying, “Check your history.”
I don’t want to see anyone make decisions based on false information. Today we are at another high, and to believe that there will never be a low is just incorrect – based on history. I was born and raised in Menlo Park, where my parents bought their home for $70,000 and then in Atherton for $99,000 when I was a teenager. Those homes are worth millions of dollars today.
If you hold on to California property for decades, you should make money. But wouldn’t it be better to buy when prices are low rather than high? We have had a strong 8 year run of prices going up in the San Francisco Bay Area, and in most cases, homes are above their 2006 highs. Those who bought in 2006, and suffered losses in 2008, are just now gaining their equity back. You’d have to hold for over a decade to recoup. HOWEVER, if you bought jut a few years later in 2009, you probably tripled your money.
Several cities on the list had relatively low post-crash growth compared to the top and bottom of the spectrum, such as Charlotte, North Carolina (number 8) Despite a median home price of $217,600 and post-crash growth of 33 percent, it made it into the top 10 thanks to dramatic economic expansion starting around 2009.
Charlotte persuaded companies to relocate to the area by promising tax breaks, and as businesses took the city up on its offer the population expanded and construction began to rebound. This city is a great example of how just the facts are not always enough when you are investing in real estate. You have to look at the trends in an area if you want to spot growth before it happens.
While Reno, Nevada, might disappoint you thanks to its last-place spot on the list, this is another instance where the numbers can be deceiving. First of all, always remember that these top-10 lists are subjective. You always have to find out what the analysts were thinking when they made them!
Fortunately, Realtor.com senior economist Joe Kirchner shed a little light on this when he explained why he wanted to create this list: “Nationally, median home prices have more than fully recovered, but at the local level, some markets have not yet followed suit.” Kirchner makes it clear that his team planned to look beyond just numbers and into trends, which explains why
Reno is on the list but at the bottom. But let’s look a little more closely…
Like Las Vegas, Reno suffered during the recession. The city relied heavily on gambling, but people cannot gamble if they have no money to bet. Nearly half of local homes were foreclosed in 2009. There was a huge homeless encampment in the downtown area. By 2011, area real estate was worth about half what it was just six years earlier.
Mehmet Serkan Tosun, an economics professor at the University of Reno-Nevada, observed of the situation in 2011, “We need[ed] a diversified economy. Relying entirely on the gambling and tourism industry is not a durable strategy.”
Reno’s city council responded to the situation by offering huge tax benefits to companies relocating to the area and highlighting the state’s cheap real estate, no personal income taxes, and wide availability well-educated workers. The city landed presence from Tesla, Apple, and data-security-startup Switch.
However, a lot of the building and development related to these companies is still in process. If you look at Reno, you’ll see that the market is definitely still in growth mode, unlike, say, San Jose or San Francisco, which have been skyrocketing for years now and are likely to the point where appreciation is about to slow down. Reno, on the other hand, has plenty of room to build (unlike San Francisco and San Jose) and plenty of room to grow economically as well.
Lists like these can’t be used all by themselves to make investing decisions, but they can guide you toward good potential investing markets. Just remember to look closely at the trends in each market to determine where your investment capital and strategy will fit best.
At Real Wealth Network, we focus on migration patterns: job growth and population growth. When combined with affordability and city plans for redevelopment, you have the perfect combination for both cash flow today and equity growth in the future.