SUMMARY OF INVESTMENT MARKETS



SUMMARY OF INVESTMENT MARKETS

DALLAS/FORT WORTH, TX

LAS VEGAS, NV

PHOENIX, AZ

TUCSON, AZ

Page 1 – Dallas/Fort Worth, TX

Page 2 – Las Vegas, NV

Page 3 – Phoenix AZ

Page 4 – Tucson, AZ

If you want cash flow then you want to buy in the Dallas Fort Worth metro area.

If you want appreciation then the unknowns come into place.

The Dallas metro area never witnessed a large increase in value when the United States saw its best appreciation rates. Dallas was hit hard in the 1980’s, and saw a collapse in real estate values with a small gain in the 1990’s only to quickly see a collapse in the .com and high tech industries. Is Dallas poised to explode with high appreciation? Will Dallas catch up to the rest of the Nation. Dallas sits in the center of the U.S. and is currently experiencing a huge increase in population due to its low cost of living, low cost of housing, and high employment wages. And in addition, jobs are abundant. Dallas is ranked 3rd highest employment growth from November 2011 to November 2012 in the Country. (Houston, TX was #1 and Los Angeles, CA was #2).

Major institutional investors are amassing a $10 billion bank account to buy single family homes and continue to raise more money every month. This purchasing power equates to 80,000 homes. Blackstone Group has already spent $2.5 billion and has purchased 16,000 homes and continuing to purchase 2,500 homes each month. Colony Capital expects to invest $150 million per month and bought 5,000 homes last year. Waypoint Homes will own 10,000 homes by the end of this year.

Prices increase from a result of lack of supply and a high demand. Currently, many suburbs surrounding Dallas have a housing supply of a little more than 2 months of inventory. Texas was #1 in migration from outside the state. The projected growth for DFW through 2040 is 4.7 million people with 30% moving to Tarrant County (Fort Worth, Arlington etc.) 21% moving to Dallas County, 18% moving to Collin County (Frisco, McKinney, Plano, Allen etc.) and 12% moving to Denton County.

To finish off the picture, I ran a search of all homes in McKinney for sale up to $200,000 and there are 83 homes for sale. In the past 6 months 663 homes sold in this price range in McKinney.

I believe the writing is on the wall and the Dallas/Fort Worth market is getting ready to appreciate in value comparative to the dramatic increases that the top appreciating cities experienced.

LAS VEGAS – I ran a search on projected job growth and migration to Las Vegas and found that the numbers are minimal and do not support an increase in value. With the large REIT’s buying up housing and creating a 23% increase in value over last year, I don’t see how the values can remain at their current level. Rents in Las Vegas, Phoenix and Tucson are very low compared to the cost of the home so the main reason to invest in these markets is the potential for appreciation. In each of these markets the huge appreciation in value that these cities experienced were controlled by the ease in lending guidelines that allowed many people to purchase homes that are not qualified to purchase today. It’s difficult to say how the appreciation rate has been influenced from these unqualified buyers. Many of the homes were sold to qualified buyers, and experienced a very large influx of people from outside those areas which contributed to their appreciation. I predict a small appreciation rate in 2013 in Las Vegas from the Corporate buyers but due to the number of investment homes on the market, rents will soften and go lower. I think over the next few years home values will drop in price or remain stable.

PHOENIX – Home sales are strong and the supply of housing is less than 4 months. A 6 month supply of homes is considered a healthy market. Less than a 6 months supply is considered a sellers market and more than 6 months is considered a buyers market where in you have an oversupply of housing and values drop. The foreclosures and short sales are drying up in Phoenix and 2012 sales fell by 10,756 homes from 2011 figures. However the volume of sales is still strong. The projections for job growth and migration are strong and home values are increasing fast. At this pace I expect values in 2013 to increase but much less than their 36.5% gain in 2012. Most of the steam has been let out and now its up to the Corporate buying power to be the cause of the next appreciating wave. Again this large purchasing power will decrease the already low rents.

TUCSON – Tucson has always remained in the shadow of Phoenix and what ever happens in Phoenix will happen in Tucson 10 months later. Projected job growth and migration are strong and the Corporations are starting to purchase the low hanging fruit.

TAKE AWAY – Corporate buying power has changed the way of doing business. They are purchasing thousands of homes across the country which results in increased home values and decreased rental rates. This is easier to see in areas that have had huge foreclosures as in Las Vegas, Phoenix and Tucson. The Dallas market is being influenced by some Corporate buying but the number of rental homes versus the migration of people moving to the area has actually kept rents increasing. I have tried to analyze the future results of today’s activity and what will happen is this:

Home foreclosures will be sold in large bulk to the Corporations causing individuals to purchase homes at top prices. This will cause individuals to start buying new homes which is what many Corporations are also starting to consider and have started to buy. Home builders have already bought all the lots that other home builders lost in foreclosure when they went out of business several years ago. Home builders are building as fast as they can to keep up with the demand in DFW so buying land in outlying areas will increase in value at amazing rates. New homes will rise in cost at fast rates and we may see buyers building homes and reselling when finished at a much high price.

Corporations were purchasing top grade office buildings and apartment buildings which they are not doing now. This ease of purchasing will allow those markets to soften and trickle down to the lower grade properties. I am still expecting to see a high foreclosure rate in multi family and office/retail properties but it hasn’t happened yet. I suspect banks are protecting their assets by not foreclosing otherwise their institution could bankrupt itself.

I look forward to your feedback and thoughts.

This article was written as the cover letter for a detailed binder covering properties for sale in Dallas/Fort Worth, Las Vegas, Phoenix and Tucson. I have established teams to help investors purchase, finance, rehab, manage and lease properties in each of these areas. Please contact me if you have any questions or would like additional information.

Gerry Bushnell

469-450-2425

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