If you are looking for a solid place to own some property within a Self-Directed Real Estate IRA, what qualities would you look for?
Well, you would want price levels to be reasonably affordable, compared to local incomes and prospects for economic growth. After all, future home price appreciation and rental market value increases have to come from somewhere. A recent market study from Owners.com looked at all the major metropolitan areas with populations of more than 1 million people, and ranked them based on the following criteria:
• Median sales prices for single-family homes
• Average differences between sale and list prices
• Average number of days on market
• Average number of homes for sale
• Average change in rent from previous year
• Percentage of properties listed sold.
Based on their ranking system, Virginia Beach-Norfolk-Newport News, Virginia took the top spot, despite a relatively flat rental value compared to a year ago: On average, rental prices rose just $7 in Virginia Beach over the past 12 months. But sellers have been discounting their homes for sale, with the average difference between sale and list price amounting to $8,376 against a median sales price of $245,000.
The area has a lot of government and defense employees, so home prices could be somewhat cyclical depending on defense budgets.
The other top markets for Self-Directed Real Estate IRA homebuyers according to Owners.com’s study, in order, are:
• Hartford, CT
• Philadelphia-Camden-Wilmington, PA-NJ-NE-MD
• Orlando-Kissimmee, FL
• Tampa-St. Petersburg-Clearwater, FL
• Cleveland-Elyria, OH
• Jacksonville, FL
• Miami-Fort Lauderdale-West Palm Beach
• Chicago-Naperville-Elgin, IL
• Pittsburgh, PA
The priciest market in the top ten, by a large margin, is the Southeast Florida market, with average single-family home prices of $339,900, according to the study. The South Florida markets also led the way when it comes to rental value increases, with the average monthly rent rising by $67 per month compared to a year ago.
Those looking to snap up lower-priced homes with their Self-Directed Real Estate IRA might consider the Cleveland-Elyria, Ohio area or Pittsburgh, Pennsylvania, with average single-family home prices of $148,500 and $157,000, respectively.
“It’s not surprising that West Coast cities continued to be strong seller markets in 2018, however the data shows that markets like Texas are becoming more desirable for home buyers, likely because home prices there are more affordable than in other areas of the country,” said Dario Cardile, Vice President, Growth at Owners.com. “While home prices will likely remain high in these top 10 markets, sellers should look for opportunities to work with a brokerage that offers the data and technology to help them understand the market, set the right price and get the most from their sale, while also enjoying professional agent support throughout the process.”
The Owner’s study also sought to identify the most overheated markets, defined as those markets where the average residents have spending more than a third of their household incomes on mortgage payments to buy a typical home in the area. For Self-Directed Real Estate IRA investors this would mean limited upside for home prices, because without some significant income increases, many residents would have trouble qualifying for a mortgage at prices that get much higher.
Unsurprisingly, the vast majority of the most overheated markets in the country are in California, with San Jose, CA, home of the famed Silicon Valley, topping the list, as well as Santa Cruz, Los Angeles, Napa and San Diego.
According to the Owners.com researchers, the top ten markets for home sellers this year are:
• San Francisco-Oakland-Hayward, CA
• San Jose-Sunnyvale-Santa Clara, CA
• Dallas-Fort Worth-Arlington, TX
• Salt Lake City, UT
• Portland-Vancouver-Hillsboro, OR-WA
• Kansas City, MO-KS
• Sacramento-Roseville-Arden-Arcade, CA
• San Antonio-New Braunfels, TX
• Denver-Aurora-Lakewood, CO
• Houston-The Woodlands-Sugar Land, TX.
The median home sales price in San Jose-Sunnyvale-Santa Clara, California was $1.29 million! That’s compared to a national median of $234,300. San Francisco-Oakland-Hayward homes were selling for $940,000.