Hot Urban Markets: What’s ahead for home prices
Travel to any major city in America and you will notice signs declaring “Economic Empowerment Zone,” “Revitalization of Our City,” “Urban Development & Community Revitalization.” Most often, you see such signs in communities that were ravaged by the race riots of the late 1960s: Bedford-Stuyvesant, Clinton Hill, Harlem and Prospect Heights in New York; Atlantic City, Newark and Trenton in New Jersey; Compton, Calif.; Detroit; and the area surrounding downtown Atlanta. Now rezoned, these communities are attracting corporate executives, young professionals and families, some of whom have traded in their three- or four-bedroom, in-ground swimming pool, cul-de-sac suburban ranch houses and two-hour commutes for the three-bedroom townhouse or two-bedroom condominium that typify today’s urban residential landscape.
The median resale single-family home price during the fourth quarter of 2005 was $240,300, up 8.0 percent from a year ago. The strongest increase in the region was in the New York City-Wayne-White Plains area of New York and New Jersey, at $537,300, up 19.2 percent from the fourth quarter of 2004. This area was followed by Reading, Pa., which posted a median price of $143,200, up 16.9 percent, and the larger region of New York, New Jersey and Pennsylvania, at $459,600, up 16.0 percent.
The New York metro market continues to be robust. In fact, the local market is in excellent shape, with a potential for double-digit housing equity gains, particularly for home buyers who plan to remain in their homes for the long term.
The long-term outlook for home prices and sales is favorable. The population is growing, job creation is healthy and there is a powerful underlying demand for homes. That should keep housing on a high plateau. The children of the baby boomer generation, often called the echo boomers, are the second largest generation in U.S. history and are just entering that phase of their lives in which people typically buy their first home. Along with a strong immigrant impact, and the boomers themselves who remain in peak earnings years, this means the need for housing will stay strong over the next decade and long-term prices will continue to rise.
Another factor affecting the boom in urban markets is the increase in immigration. Immigration is expected to account for half of the U.S. population growth between 2005 and 2050, which will make it an important influence on future housing demand. When immigrants come to America, they historically have come to urban centers that were once plagued with crime and poverty. This is no longer the case. The demand being created in the market opens the door for developers to come in and meet the growing demands of these urban communities.
Real estate investment clubs have grown fourfold since 2002, a direct result of the housing boom, according to a May 2005 report in USA Today. Members pool their money to acquire properties and make a comfortable return by “rehabbing” (fixing up properties and selling them for a profit), “landlording” (buying properties for rental purposes), or “wholesaling” (buying inventory at steep discounts and flipping it quickly at a profit). Newcomers to the club scene include Double D Enterprise Investment Club, in the borough of Queens, N.Y., and H&M Investment Ministry in Brooklyn, N.Y.
J. David Washington is president and CEO of Forbes Capital Group Inc., www.forbesfg.com.