I enjoyed the opportunity to write a guest column for Business Insider’s GREAT DEBATE feature, “Where Will Americans Be Living In 20 Years” in which several folks in the real estate industry offered their opinions on what part of the country would become a real estate hot spot over the next two decades.
In an article titled “The Rustbelt Is Poised for A Comeback” I cast my vote for five cities in the Great Lakes region: Milwaukee, Chicago, Indianapolis, Detroit and Cleveland.
I realize that real estate conditions in these cities are not looking too hot right now. All of these cities have elevated foreclosure levels, and all five had foreclosure rates above the national average in RealtyTrac’s May 2012 U.S. Foreclosure Market Report.
While I’m not expecting a quick turnaround in these cities in the next five or even 10 years, I think there are three solid reasons these cities will gradually emerge as housing hot spots over the next 20 years.
1. Rock-Bottom Real Estate Prices: the average price of a home in some stage of foreclosure or bank-owned was less than $90,000 in all five of these cities except for Chicago in the first quarter of 2012. The average foreclosure price in Chicago was $130,378, still 38 percent lower than the average price of a non-foreclosure home.
And there are plenty of bargains available in these cities, with foreclosure-related sales accounting for at least 20 percent of all sales in all five cities. Detroit documented the highest percentage of foreclosure-related sales, 41 percent.
Bargain-basement real estate prices, particularly on distressed properties, is already drawing buyers and investors to these markets and will continue to do so over the next few years as the economy improves. Which brings us to our next point.
2. Job Growth: a revitalized auto industry will continue to rise from the ashes and provide the foundation for steady job growth in these five cities over the next five to 10 years. Employment numbers are gradually growing while unemployment rates are gradually falling in all five states where these cities are located, and three of the states — Wisconsin, Ohio and Indiana — have unemployment rates below the national average.
Jobs are of course probably the most important factor in determining the health of any given real estate market, so any change in the positive trajectory in the job market will threaten the long-term health of the housing market in these cities.
3. Nowhere-To-Go-But-Up Mentality: The housing market in all five of these metro areas, particularly the urban core of these metro areas, has been decimated by foreclosures and high unemployment rates. Certainly that’s not good news now, but the severity of the housing crisis leaves these cities in a position where they have nowhere to go but up.
Furthermore, the depth of the housing crisis in the urban core of these cities provides a certain freedom for city leader to re-think and re-imagine what their cities will be, and rebuild based on that vision. Right now, many of these cities are still in teardown mode, literally, with thousands of foreclosed and vacant properties being demolished by land banks. But once that wreckage is cleared, the cities will be in a unique position to re-invent themselves in a way that is attractive to the modern American buyer.
I’d like to hear your opinion on this topic. What region or regions of the country do you think Americans will be flocking to over the next 20 years? Where do you see yourself living in 20 years? Share your thoughts in our comments section below.
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