All Forum Posts by: James Park

http://money.cnn.com/2014/12/04/real_estate/hot-ho...

Some of the cities listed below maybe obvious and some maybe a suprise to you. No cities in Florida are on this list. While Atlanta, Dallas, and Houston were obvious cities for me, I was surprised to see 2 midwestern cities. For those of you who live and invest in Minneapolis, MN, Des Moines, IA, can you please explain why you think that your local market is hot market in 2015?

City                                          2015 Homes Sales Forecast              Median home price

1. Atlanta, GA                          11%  -  under rental parity                             $168k
2. Dallas, TX                             7%   -  rental parity                                       $260k
3. Des Moines, IA                     9%   -  under rental parity                             $112k
4.  Denver, CO                          14% -  rental parity                                      $291k
5. Houston, TX                           5% -   rental parity                                      $284k
6. Los Angeles, CA                    6% -   over valued                                       $532k                  7. Minneapolis, MN                    9% -      under rental parity                         $199k
8. Phoenix, AZ                           11% - rental parity                                      $169k
9. San Jose, CA                          3% -  over valued                                      $757k
10. Washington D.C.                 10% -  over valued                                     $455k

I think we can conclude that there is no right or wrong answer to this thread. Stick to what you know, invest in what you know, and invest only in what you yourself have a wealth of knowledge in. These SM wizards below have no need for REI.

I am firm believer that both equities and real estate has its place in one's portfolio. From many portfolios I have observed and seen over the years of individuals with a networth between $1M to $5M, you will rarely see that all of their assets are in one basket. Usually the bulk of their assets are concentrated in their private businesses, equities, and real estate. Equities positions are in the low 20% and rarely exceeds 25% of a multi-millionaire's entire networth. They also hold a lot in cash usually in similar % in the amount invested in equities as they haven't forgotten the last stock market crash from 2007 - 2009. Holding cash gives them a peace of mind even though inflation can erode its value.

Financial Advisors will tell you that equities should be the foundation of your wealth while Real Estate forums will tell you that one should be heavily allocated to real estate. I think one should diversify as both real estate and stocks do not always move in the same direction. 

From a timing stand point, I think it is dangerous time to be long stocks at this time, as major correction is long over due as it is just matter of time before the market cracks. We are currently 15 years into the 18 years market bear market cycle started in the NASDAQ crash in April of 2000 and sometime in 2017/2018 we will see a reset of a new bull market like we have last seen similiar from 1982 - 2000. 

Over a ten year horizon, the S&P 500 Index will beat 80% of all managed funds. If equities is not your cup of tea and you have no desire to analyze and picks stocks, I highly recommend the Vanguard Index 500 where the management fee are .05%.

If you are among the top 20% who can consistently beat the S&P 500 year after year for the last 10 years, you should start your own personal hedge fund.

Personally for me, I disagree with 99% of financial advisors and believe that real estate should be the foundation of one's wealth portfolio. Financial advisors will usually try to sell you on retirement accounts, annuities and life insurance while you can see from the net allocation below that these categories are a very small percentage to a multi-millionaire's overall portfolio. 

Here is the Appreciation Index Data (YTD)  from Jan - Sept 2014. Think of the national real estate market as one big stock market, where each blue chip stock pays dividends. The national index would be equivalent to the Vanguard Total Market Index fund and the 20 MSA City Index is equivalent to the top 20 Blue Chip Stock Index like San Francisco (Apple),  Seattle (Microsoft), JP Morgan Chase (New York) and Atlanta as (Coca Cola). Certain micro cities within that MSA will either out perform or under perform the city index. For example, Dallas Index shows appreciation of 7.17%, an Rental property in an A neighborhood in Dallas may have appreciated 13%, a C rental property in Dallas may have only appreciated 2%. 7.17% is just the index metro Dallas.

The top three MSA appreciation goes to San Francisco, Dallas, and Seattle. The bottom three MSA are Cleveland, OH, Washington DC, and Phoenix, AZ. Each of the index data below is the average YTD appreciation of the MSA city.

10 MSA City Index 4.78%
20 MSA City Index 4.89%
National Index        5.04% 

YTD Appreciation in 2014.

Rank
#1: Bay Area, CA:    7.57%
#2: Dallas, TX:         7.17%
#3: Seattle, WA       7.05%
#4 Denver, CO        7.00%
#5 Portland, OR     6.92%
#6 Las Vegas, NV  6.78%
#7 Miami, FL          6.66%
#8 Atlanta, GA       5.09%
#9 San Diego, CA   4.87%
#10 Chicago, IL      4.82%
#11 Tampa, FL      4.77%
#12 Boston, MA    4.71%
#13 LA/OC, CA     4.68%
#14 Detroit, MI      4.23%
#15 Charlotte, NC 3.94%
#16 New York, NY 3.59%
#17 Minneapolis, MN  3.25%
#18 Cleveland, OH  3.24%
#19 Washington DC 2.74%
#20 Phoenix, AZ  2.01%

@Mike H.

This is what the Chicago index chart looks like. The numbers look like the following as of September 2014.

1 month : 0.22%
3 month : 1.03%
12 month : 2.57%

For properties to double in ten years, you need an average of 7.2%. 3.6% annual appreciation will get you there in 20 years which is below inflation. My concern for Chicago is that the population is slowing significantly compared to the other large metropolitan cities like LA, NY, Seattle, SF, Dallas and property taxes are high. This is just my opinion, but I do not think we will see the Chicago index appreciate at the same percentages we have seen from 1990 to the peak before the crash 2006. It may be a while until Chicago reaches the Sept 2006 index again. 

1. Do you believe that the appreciation we have seen in the past (1990 - 2010) will continue in the future (2010 - 2030)? For example, markets that tripled in value like the LA market ($250k median home price to $750k) will continue to appreciate in double digit %.

2. Do you believe the real estate markets will start to decouple in 2015? Some under valued markets like Dallas will see a unprecedented sustainable 7-9% appreciation while an over valued market like the Bay Area / OC / LA will see either 1-2% appreciation, or possibly negative numbers in the years ahead while other RE markets will not see appreciate at all.

What are your thoughts? 

Texas's population grew 4,293,741 between 2000 - 2010. From 2010 - 2020, I estimate the population to grow by almost a million more from the last decade at 5,210,528. We are going to see higher numbers (population inflow) from the last decade for Texas, California, and Florida while North Carolina and Georgia's population seems to be stabilizing from 2000 - 2010 inflow numbers.

What is interesting is that these five states: Texas, California, Florida, North Carolina, and Georgia is capturing more than 50% of the population growth in the United States.

Great job @Azeez K! and thanks for putting this together! We should do this meet up more often. Let me know if I can help in anyway for your next Atlanta meetup.

@Stan Butler, It is was good meeting you. It is really cool to hear the type of investing that you do. I would love hear more. 

Whenever you are in the Northview area, let me know so we can get together.