Downturn Makes Some Markets More Attractive to Investors

With the nation’s real estate market still struggling to find a bottom and subsequent rebound, there may be a few pleasant surprises on tap for investors. Hard-hit by …

With the nation’s real estate market still struggling to find a bottom and subsequent rebound, there may be a few pleasant surprises on tap for investors. Hard-hit by economic turbulence, some of the country’s most expensive markets are turning up the best values seen in years.

Those seeking to take a bite out of the Big Apple may not find a more opportune time to do so – if they have the cash to put down for the privilege. Manhattan-based appraisal firm Miller Samuel reports that Manhattan median prices were $675,000 in the first quarter, a 21 percent drop from $852,500 a year earlier. Those figures are painful, but not nearly as bad as in neighboring Brooklyn, where sales have declined 57 percent year-over-year.

Across the country in Southern California, property prices are also struggling to find a bottom. The National Association of Realtors reports that Los Angeles metro area prices fell 31 percent during 2008, with Moody’s forecasting that prices will tumble another 29 percent. Those figures are based upon historical balances of vacancy rates, income, housing sales, lending availability, foreclosures, and employment.

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Falling prices have wrought bidding wars amongst investors in the Los Angeles area, particularly with regard to lower-priced foreclosure sales. Similar investor bidding wars are being seen in other pockets of California such as Sacramento, as well as amongst foreclosed properties in Arizona, Washington, D.C., and Minneapolis-St. Paul.

Investors may also wish to consider Florida, one of the hardest-hit states. In Miami, home prices are down 32 percent from a year ago, while prices tumbled 27 percent in Orlando and 9 percent in Jacksonville, according to Moody’s. Add in unemployment figures higher than seen in a decade, and you have markets that may be ripe for the picking.

In Miami, historically considered one of the nation’s most unaffordable markets, investor interest has spiked with regard to the city’s overbuilt condo market. Real estate consulting firm Condo Vultures LLC says that of the nearly 13,000 new condo units sold in downtown Miami since 2003, investors and second-home buyers account for nearly 60 percent of buyers. With another 10,000 new and unsold units in the pipeline, this is a market to watch for ever-increasing deals.

U.S. bargains are also attracting investors from overseas – for example, a slew of wealthy Chinese investors are signing up for home-buying tours throughout the United States. American investors are also heading overseas to avoid turbulent market conditions, with investment research firm Morningstar Inc. saying that U.S. global real-estate mutual funds have nearly doubled in the past two years, collectively managing $16.8 billion.

It appears that the savvy investor may well seek bargain-basement prices here at home, while at the same time diversifying by purchasing properties overseas. Make sure to stay abreast of the latest news while deciding where your investment dollar is best spent.


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