How to Find Investment Deals in the New Normal Economy

The real estate investment strategy is changing for 2014. For the years 2012 and 2013, the strategy was buying at the bottom of the market. For 2014, your strategy should be buying in the fastest growing markets while prices are still reasonable. You want to buy where prices are still low but in places with plenty of growth potential. Not in places with a stagnant economy. 

This could be in places like North Dakota where business is booming from the oil rush. However, housing prices have skyrocketed because there is little infrastructure in place to accommodate the huge influx of workers moving there. Instead, look to major metropolitan areas with plenty of infrastructure to accommodate the expected growth.


Texas is the Place to Be

A recent study by Local Market Monitor looked at the largest 100 metropolitan statistical areas (a geographical designation used by the U.S. Census) with populations of at least 575,000. Cities in Texas make up three of the top five recommendations. Dallas came in at the top with an economic growth forecast of 29% over the next three years. Still, home prices are well below the national average with plenty of room to increase.

The Fort Worth area came in at number two with a three-year economic growth forecast of 25%. Charlotte and Houston tied for the third and fourth spots with a 24% economic growth forecast. And Nashville came in at number five with a forecast for 23% increase in local economic activity. People will move to where jobs are being created.

These numbers are substantial considering the national gross domestic product index is only expected to grow at a rate between 2% and 3%. China has the fastest national growing economy in the world and that has only hovered around 10% for the past several years. Economic growth rates north of 20% mean these cities are going to be buzzing with money for years to come. Low housing prices plus large growth is a formula real estate investors have to love.

Affordable Housing

An important factor taken into consideration in the study is these markets offer homes that are affordable to the middle class but are priced well below the actual value. For example, the top city of Fort Worth is under valued by about 20%. The average home price is $168,383 but the experts believe the actual average value is above $180,000.

Most investors believe the ideal purchase price is for 30% below market value. When the total local market is under valued by 20%, you know there are going to be plenty of great deals meeting the 30% criteria. When you pair that with an explosive local economy, you have an almost perfect real estate investment formula.

For more insights to the 2014 real estate market, please check out this article:

Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.