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I Wouldn’t Dare To Buy Real Estate In These 3 Incredibly Overvalued Markets

In the last two years, the median national home price has increased by 34% – more than four times the growth rate from 2018 to 2020. In many real estate markets, house prices rose even higher during this time. For example, home prices in Tampa, Florida rose 49%, while in Austin, Texas, home prices rose 59%. With home prices rising so fast, it’s not surprising to hear that several real estate markets are overvalued, putting homeowners and investors at risk in the event of a pullback.

Buying real estate in an overvalued market can make sense if long-term demand and the lack of space for new housing or new housing are the primary factors driving the price increase. But that’s not the case for many overvalued markets. This is exactly why I do not dare to buy real estate in these three markets.

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Miami, Florida

Miami, Florida is a hotspot for tourism, international investments, and institutional investors. Its tropical climate, gorgeous beaches, proximity to other countries, vibrant nightlife and diverse neighborhoods have made it a popular place for people to work and live for decades. But in the past two years, the city has seen an increasing number of residents move in. redfinMiami was the number one city for relocation for the second quarter in a row, with the majority of its residents coming from New York City.

Immigration is a good thing – it means more demand for things like housing, restaurants, retail and other real estate properties. But Miami faces many challenges, including impacts from: environmental challenges like a flood that questions the future of the city. It’s also the most affordable housing market in the US, making it difficult to get a good return on investment.

Finally, Miami’s housing market has historically been known to be particularly well-supplied for condos and upscale luxury residences, both of which show signs of slowing down as mortgage rates rise. I think today’s market squeeze will be short-lived, as less buying will increase supply again.

Boise, Idaho

Boise, Idaho has been one of the top five fastest growing real estate markets for several years now. If not, one of the hottest most The hottest real estate markets in the US as people in western cities move into the fast-growing region. According to a study by Florida Atlantic College of Business, Boise, Idaho is the most overvalued city in the United States, with current values ​​estimated to be 72% above expected price.

The average home price in the city is $535,000, and the average rental rate is $1,500—not huge numbers if your goal is to own a rental property. Boise house prices talk reach the heights, but I’m not so sure. There is a lot of capital being launched and incentives to attract wealthy individuals, and the ongoing pandemic has only motivated many from high-tax states like California to take action. However, the demand it sees today does not mean it is an ideal place to invest.

Austin, Texas

Austin, Texas has quickly made a name for itself as one of the coolest new cities I can call home. It is the fastest growing city in Texas, with an approximately 21% increase in residents from 2010 to 2020. Estimates outside of the larger metropolitan area surrounding Austin will hit the 3 million residents limit by the end of the next decade. Like Boise, I think current housing demand in Austin is justified. There are good business opportunities, especially as more and more companies expand their operations or relocate their headquarters to the city and due to insufficient housing supply.

But investor interest Unlike the city of Boise, market penetration has pushed prices up as people try to get a share of what could be the next big US city. With a ranking of 75 out of 100, competition is fierce and Florida Atlantic is the second most overvalued market, with valuations up to 67% higher than expected, according to Redfin.

what would i buy

In the case of these three markets, I would rather invest my money in a more affordable market with less competition and better returns. Although I will not personally buy real estate in these cities, it does not mean that I will not invest in these cities. Real Estate Investment Trust (REIT) invests there. In fact, buying shares in a REIT with exposure to these markets is one of the best ways to take advantage of high demand while minimizing my exposure to risk.

REITs have much better margins to buy, thanks to things like large amounts of cash, economies of scale, and lower cost of capital that can increase returns on high-end real estate that I personally would never buy. Overvalued markets are risky, but that doesn’t mean they’ve been sold out.

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