Boomer’s Blog

Despite ongoing troubles in the U.S. housing market, some areas post green lights for investors looking for relatively high and fast price gains in the next year. According to Money magazine, these markets have what it takes to make for solid real estate investments (REI). (Additional data provided by Wikipedia and the U.S. Census Bureau.)

1. McAllen, Texas:

• U.S. Census data for 2003 estimated the city’s population to be 116,500.
• 12-month forecast: 4 percent
• Median home price: $109,000
• One-year price change: 2.1 percent
• Five-year price change: 23.3 percent
• Change in foreclosure rate: 23 percent

2. Rochester, N.Y.

• U.S. Census data for 2003 estimated the city’s population to be 216,000.
• 12-month forecast: 2.7 percent
• Median home price: $121,000
• One year price change: 3.4 percent
• Five year price change: 20.1 percent
• Change in foreclosure rate: 5 percent

3. Birmingham, Ala.:

• U.S. Census data for 2003 estimated the city’s population to be 236,600.
• 12-month forecast: 2.7 percent
• Median home price: $156,000
• One year price change: 2.9 percent
• Five year price change: 29.4 percent
• Change in foreclosure rate: 20 percent

4. Syracuse, N.Y.:

• U.S. Census data for 2003 estimated the city’s population to be 144,000.
• 12-month forecast: 2.6 percent
• Median home price: $126,000
• One year price change: 0.8 percent
• Five year price change: 29.5 percent
• Change in foreclosure rate: 27 percent

5. Buffalo and Niagara Falls, N.Y.:

• U.S. Census data for 2003 estimated Buffalo’s population to be 285,000; Niagara Falls to be 54,000.
• 12-month forecast: 2.4 percent
• Median home price: $105,000
• One year price change: 1.6 percent
• Five year price change: 24.5 percent
• Change in foreclosure rate: 14 percent

6. New Orleans, La.:

• U.S. Census data for 2003 estimated the population to be 469,000.
• 12-month forecast: 2.2 percent
• Median home price: $158,000
• One year price change: 1 percent
• Five year price change: 43.7 percent
• Change in foreclosure rate: 49 percent

7. Scranton, Pa.:

• U.S. Census data for 2003 estimated the population to be 74,300.
• 12-month forecast: 2.2 percent
• Median home price: $128,000
• One year price change: 7.2 percent
• Five year price change: 41.1 percent
• Change in foreclosure rate: 8 percent

8. Grand Rapids, Mich.:

• U.S. Census data for 2003 estimated the population to be 195,600.
• 12-month forecast: 1.9 percent
• Median home price: $124,000
• One year price change: -3 percent
• Five year price change: 8.3 percent
• Change in foreclosure rate: 37 percent

9. Baton Rouge, La.:

• U.S. Census data for 2003 estimated the population to be 225,100.
• 12-month forecast: 1.9 percent
• Median home price: $170,000
• One year price change: 5.7 percent
• Five year price change: 38.3 percent
• Change in foreclosure rate: 14 percent

10. El Paso, Texas:

• U.S. Census data for 2003 estimated the population to be 584,100.
• 12-month forecast: 1.8 percent
• Median home price: $134,000
• One year price change: 6.9 percent
• Five year price change: 51.9 percent
• Change in foreclosure rate: 32 percent

Can’t sell that flip? Consider becoming a landlord to generate cash flow while you hold on for better prices.

The Wall Street Journal reports that 2.2 million vacant homes were for sale in Q1, up from 2.1 million in Q4, and about one million more than was considered “normal” before economic crises permeated the market.

The U.S. homeowner vacancy rate, which tracks the number of vacant homes for sale, jumped to 2.9 percent in Q1, up from 2.8 percent in Q4 2007. According to recent U.S. Census Bureau housing data, the vacancy rate has risen significantly since the housing bubble morphed into the mortgage meltdown. Between 1995 and 2005, the rate sat between 1.5 percent and 2 percent.

Families today are no more likely to own their homes now than they were in 2002, despite widespread opportunities, such as subprime mortgages, that were purported to boost home ownership among borrowers with poor credit scores. Related Census data show that the seasonally adjusted share of homes occupied by owners rose to 67.9 percent Q1, up from 67.7 percent in Q4 – this level peaked at 69.3 percent in 2004. These numbers and the credit crunch fuel more speculation that home prices will continue to drop well into Q4 2008.

While the dream of home ownership has become an Ambien-fueled nightmare for many Americans, data show that droves of families who’ve managed to claw their way out of bad mortgage deals are looking for places to live.

There currently are 4.1 million vacant homes for rent, and the rental vacancy rate edged up to to 10.1 percent in Q1. The rental vacancy rate clearly is on the rise since Q4’s rate of 9.6 percent was recorded by the Census. Analysts say however, that the growing inventory of vacant rentals should keep rent prices relatively stable, and help to temper inflation.

For those looking into becoming a landlord, the Boston Globe offers six rules from the trenches that could save you from financial — and emotional ruin.

Forbes.com has surveyed the 40 largest U.S. metropolitan areas and aggregated various data on foreclosure listings, job growth, transaction volumes, vacancy and current inventory rates to build a list of the 10 most ominous real estate markets in the nation.

1. Detroit, Mich.: Here, foreclosures are five times the national average, jobs are few and people are moving away in droves; the economy continues to suffer.
2. Orlando, Fla.: This market has a 7 percent vacancy rate, despite job growth in the past few years. Analysts predict negative growth for this market in 2008.
3. Cleveland, Ohio: Here, a 3 percent foreclosure rate ranks the sixth worst in the U.S. Also, there has been no significant job growth recorded since mid-2006. when the rate rose only 0.1 percent.
4. St. Louis, Mo.: Market values here dropped 20 percent from 2006 to 2007. This year, the foreclosure rate has surpassed 1 percent and job growth continues to stall. Analysts say that the sharp declines, and rock-bottom prices are likely to reduce recovery time — if the local economy holds up.
5. Miami, Fla.: Foreclosures here are the eighth highest in the U.S. and construction-fueled job growth has suffered hard hits in the past two years.
6. Las Vegas, Nev.: Despite stellar construction-based job growth in 2004 — 2005, growth in the past two years has been flat. Dangers here include rising foreclosure rates, high inventory, and threats that the overall economy will worsen.
7. Sacramento, Calif.: Ranked the fifth worst foreclosure market in the U.S. Beyond the 3 percent foreclosure rate, this market also suffers from jobs losses as as the construction-powered economy tapers off. But transaction volumes are up, even if prices are down. Way down. Here, desperate homeowners have set records with their agressive price reductions.
8. Denver, Colo.: Despite strong economic growth over the past four years, and a $240,000 median home price, Denver has experienced 50,000 foreclosures, or nearly 3 percent of the market, thusly earning the ninth-worst foreclosure rate in the nation. This market’s saving grace is reported job growth at three times the national average.
9. Tampa, Fla.: Although this market continues to add residents and remains a popular destination for retirees, inventory remains high and dismal growth in the service-oriented job market doesn’t seem to be helping.
10. Phoenix, Ariz.: With an economy supported by the construction industry and overbuilding, there are 53,000 homes reportedly on the market. This sky-high inventory is five times the 2005 rate, and homes aren’t selling anywhere close to asking prices. Besides holding one of the highest foreclosure rates in the nation, the distressed Alt-A and sub prime loans aren’t contained within one single area as is typical among large metropolitan locales.

Note: These data were culled from the following sources to create the list, which bears more bad news for cities already suffering from high foreclosure rates, job growth stagnation and dwindling tax revenues: Foreclosure listing service; RealtyTrac; job growth: U.S. Bureau of Labor Statistics; transaction volume data: Radar Logic; current inventory rates: U.S. Census Bureau; and multiple listing service (MLS) data: ZipRealty.