Friday, April 16, 2010

Hot Real Estate Markets

“Whatever mix you deem prudent, I believe it's time to reevaluate your exposure to the real-estate sector. In my view, real estate belongs in every diversified investment portfolio. It's not highly correlated to equities or fixed income, and it offers income opportunities as well as a potential hedge against inflation. I've been keeping some cash on hand designated for real estate, and I've concluded it's time to put some of it to work.”

—James B. Stewart, as reported in the Wall Street Journal 4/9/2010. Stewart is a columnist for SmartMoney magazine and, writes weekly about his personal investing strategy.

According to the Center on Housing Policy, the five most expensive homeownership markets in the country posted gains in 2009 median home prices as compared to the previous year. And virtually all California cities on the top 20 list of expensive housing markets posted gains in 2009 median home prices as compared to the previous year.

Seattle dropped in the list from #14 in 2008 to #20 in 2009, with a median home price of $303,000 in 2009 as compared to $335,000 in 2008.

The NY research firm Reis tracks vacancies and rents in the top 79 U.S. markets, and rents rose in 60 of them, led by Miami, Seattle and New York—all cities that had notched big rental declines in the past year. Median rents for a two bedroom apartment, edged up in Seattle from $976 in 2008 to $1056 in 2009, making it the 47th most expensive rental market in the survey by the Center on Housing Policy.

Interestingly, 2009 rents in Bremerton, WA were comparable to rents in Dallax, TX at $894 for that same two bedroom (#82 on the list). Tacoma rents ranked #60 at $968, just above Santa Fe, NM. And Olympia was #86 on the list with rents of $876.

Meanwhile, difficulty in financing new apartment construction has limited the supply of new multifamily units that will be added in the coming years. This news has landlords and investors excited about the potential for rents to increase once the economy recovers.

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