All Forum Posts by: Stefan Tsvetkov

@Phillip Dwyer Please read my above comments more carefully. 'Valuation' = deviation from historical price/income ratios, and not used synonymously with prices. Can see my lecture at 38:00 forward at the below link if curious to know more:

US Real Estate Valuations and Outlook Post 2020 Recession, lecture by Stefan Tsvetkov

@Kyle Mccaw I agree with your comments. Housing shortage place a material role on valuations. That said % valuation above should indirectly reflect that, as uses a trailing history of price-income ratios, that shift up as shortage happens (i.e. above valuation % reflected downward for the shortage already)

Seems good to study Census data on population/housing supply at the county level to see how exactly shortage has evolved in Austin/Fort Worth. I am curious myself too.

@Alex Builder I see the Bronx, NY market ~7% overvalued for the past 2 years based on historical prices and incomes. The market has rallied 40% since its last 'fair valuation' in 2013 and so appreciation has been solid.

Seems a good market to invest if price rally continues for several more years, though if COVID/subsequent effects lead to peak of cycle, may potentially see some correction.

@Nishil Kothary Most of New Jersey is undervalued right now as based on historical price-income ratios. The state price performance since latest 'fair valuations' post 2007 has not been stellar, while incomes have grown stronger. I commented the same on another thread. Hudson County is one exception as fairly valued, but then there are counties at >20% undervalued.

High absolute prices preventing good cap rates (price-rent ratios), are also not present as NJ has pretty strong caps outside of Hudson County, in spite of super high property taxes (e.g. 8% average for multifam in Sussex County, 10-12% in counties like Burlington, Cumberland etc, zero endorsement for those).

Also cap rates in Hudson County can go upto 8.5-9% for a 3-4-family property, in spite of a dismal 4% average cap rate for the county.

Speaking of general affordability here? Northern NJ, as is most of the rest of NJ is undervalued now and not the opposite, as incomes have grown stronger than prices in NJ this market cycle. There are in fact counties such as Morris or Sussex, that are >20% undervalued. Hudson County is the only fairly valued county, and there are some slightly undervalued ones as well. 

Can PM me for further info.

@Vincent Villani Price performance in Hudson County (overall) has definitely been stronger than Middlesex County. The former county is 38% above its 'fair valuation' level of 2010, and the only "strong performing" county in price terms in the state this market cycle. Middlesex county is 16% above its 'fair valuation' level of 2011.

Hudson county though appears fairly valued now vs historical price-income ratios, while Middlesex slightly undervalued.

@Ray T. I posted some of this info on another thread. Allentown, Bethlehem have been sluggish in price terms (6% and 2% respectively above their 2009 'fair value' levels). Look great for cash flow and flips, though long term price appreciation definitely hasn't been strong. Just something to keep in mind!

@Emmanuel Jeanty Just my take on Eastern PA (Allentown, Bethlehem) markets. Allentown being the 3rd largest city in the state of Pennsylvania, and having some proximity to NYC, the area seems trendy with NYC metro area investors. 

While I am sure it is a great area for cash flows, flips/price inefficiencies capturing, the area appears rather stagnant in terms of long-term price appreciation trend. Allentown and Bethlehem prices are just 6% and 2% above their 2009 respective 'fair valuation' levels. 

Both cities are undervalued as based on historical incomes, but then this is in part due to their not strong price performance.

Fast forward 3 years, and the general Philadelphia county market is still -3% slightly undervalued as based on historical incomes. It has also performed well in price terms at 31% above its 2010 'fair valuation' level. Not sure about specific neighborhood, though the overall county figures are looking good.

@Sam H. "Undervalued" in price-income or other relative measure terms, reflects periodic shifts in affordability, and not the absolute level of affordability at a given point in time. The latter may correlate with the capacity to earn surplus cash flow, and it is possibly what you mean by "undervalued" here.