I got a comment from a real estate agent the other day on the ActiveRain blog. She said:
- “You can spot the problem investors right away. They have absolutely no criteria for what they are looking for. Their criteria is "anything that is a good deal." Good luck with that. If you don't know what you want to buy you don't know what you are doing.”
Hmm….that sounds like pretty good criteria to me – that's something I say to my agent all the time. And that’s a fact that many real estate agents take a while to understand. But that’s okay – we just have to get the point across that as investors we’re looking for something different than the average homebuyer. An investor isn’t going to say “go find me a nice 3 bed 2 bath with room for my quilt collection on a corner lot.” An investor is simply looking for a bargain that’s going to generate cashflow.
And in some areas, bargains are easier to find these days than others. In Global Insight’s 3rd Quarter Housing Price Study, released this week, New Orleans took over pole position as the most undervalued market in the United Sates, a spot that was held by College Station, TX (home of the Texas A&M Aggies) last quarter.
Overall, economists take a bad rap, and I understand there are those out there who don't like valuation studies. But generally I thikn they're useful, and I like Global Insight’s approach. One thing that does pop out me, though, is that New Orleans is…different. The Global Insight algorighm seems to do a good job of tracking trends when applied to historical data, but one has to wonder how well it fits the situation in New Orleans post Katrina/Rita. So I’d look at that particular data point with a bit of suspicion.
Texas still dominates the bottom five (Dallas, College Station, Houston and Fort Worth, in addition to New Orleans). No news there. Other notables: Tulsa, OK; Rochester, NY; Charleston, WV; Wichita, KS; Columbia, MD; Indianapolis, IN. Investors in these markets should have an easier time of finding investments that produce positive cashflow. The coasts are still challenged, but as prices have flattened/declined so have the levels of overvaluation.
