Looking to invest in a home this year? You’re in the right place!
Forbes teamed up with Local Market Monitor, a North Carolina-based data company that tracks home prices and economic factors in more than 300 housing markets, to find the top 20 housing markets to invest in this year. Their research revealed Houston as a best buy city for housing investment in 2015.
This may not come as a shock to those who are familiar with investment trends in the housing industry. Houston has long been at the top of the list when it comes to smart purchases in real estate.
Given its business-friendly regulatory environment, lack of state income tax for corporations or people, and highly educated labor market, it’s no surprise that people are flocking to Houston in droves. Strong job growth, a large population, and relatively low housing prices make Houston the perfect place to settle into your dream home.
In many cases, homes are still considered to be fairly undervalued in Houston. How do you determine whether housing prices are over or under market?
According to Forbes, Local Market Monitor calculates the “Equilibrium Home Price,” or the “Income Price,” to gauge whether homes in a particular market are over- or undervalued. The “Income Price” tries to capture how the average home would be priced in a market without speculation or disruptions, like the housing crash. It also determines how housing prices relate to the average income over several years. According to the survey, Houston’s housing market remains underpriced by 7 percent.
“In every market there’s a relatively fixed relationship between home prices and income,” says Ingo Winzer, founder and president of Local Market Monitor. “When prices go above that level, that’s really when markets are overpriced. In this strong real estate recession, prices have gone under this income price.” When homes are under the equilibrium or income price, investors can feel fairly confident that they’ll make a good return.
As recovery from the housing crash continues to progress, there are fewer markets that are undervalued. “Getting a good deal is less likely, frankly,” says Winzer. “But in these markets you’re getting a strong rental stream. So now economic growth is relatively more important.”
The fact that Houston offers a good buy in real estate isn’t exactly a secret—recent sales in the housing market have been off the charts. The Houston Chronicle reports that, according to the National Housing Trend Report, Houston has one of the best housing markets with sales moving quicker than other major cities. “The Houston market has been one of the best housing markets in the country coming out of the recession as its economy has been one of the strongest and fastest growing,” states Jonathan Smoke, chief economist for Realtor.com
Houston isn’t the only Texas city on the list—in fact, Texas has the most Best Buy cities out of all U.S. states. Texan cities make up 25% of the list, with Austin, Houston, Dallas, San Antonio, and Fort Worth rounding out the top 10. Cities in Texas are particularly good housing investment bets because they have more diversified economies than other oil boomtowns.
So what does all of this mean for potential buyers in Houston?
Whether you’re a young couple searching for your dream home or an investor looking to wrangle a few rental properties, one thing’s for sure—you’ll get the kind of deal that’s worth writing home about.