Like to tap the collective FR brain...Assuming there is a bubble in the areas most frequently said to be bubble markets (NYC, BOS, SFO), and that it will go into decline, what do people think will happen to the more rural areas in the event of those markets declining? Is there an expected move of capital from those frothy regions to the rural areas, kicking up those prices? Or will the rural areas decline in price as well, as the urban bubbles deflate and become more affordable?
I'm interested in leaving my urban rental and buying into a rural area, perhaps an acreage. Not looking to 'speculate' as I actually want to live there, but also want it to be a good investment. Trying to figure out if thats a bad move at this time.
Personally, I suggest finding a piece of property you like at a price you can afford, and forgetting about the "investment" end of it. Buy it and live happily ever after, so that the only time you have to worry about what it's worth is when property taxes come due. Anything else is just asking for trouble ;)
European and Asian money will keep the high-demand city markets afloat for a surprisingly long time. Even if the prices stop going up and the ultra high-end properties take a nosedive, there isn't going to be much of a decrease in New York or San Francisco.
But look out in the areas where those Europeans and Asians don't want to live...paradoxically, places like Houston, Kansas City, and Memphis are going to take a much harder hit than anyone realizes, even if prices haven't gone up as much as they have in the high-demand areas.
For an investor, just hold cash for a while and wait until the high-demand markets cool off a bit and offer better opportunites. Rural real estate is a lousy investment, but OK if you just want a place to live.
All depends on how you define rural. In most cases a true rural real estate market is almost totally unlinked from an urban market. The buyers in urbania don't want to live next to a farm that produces real farm smells.
For example. My area is about 90-120 miles form the nearest big city (Indianapolis). When Indy prices for real estate go up the realtors here don't even take notice. Totally different markets. We have no bedroom communities for Indy down here. The Indy people don't want to live here and we don't want to live there.
Now if you're looking for a commuter distance to NY, Boston or ? then it's an entirely different story. But then you're also not looking to a true rural area either. The human pollution of the city spills over to the suburbs
(I look at homes in Indy or other big cities that cost 3 to 4 or more times what my bigger home cost and I see insane buyers)
I'm interested in leaving my urban rental and buying into a rural area, perhaps an acreage. Not looking to 'speculate' as I actually want to live there, but also want it to be a good investment. Trying to figure out if thats a bad move at this time.
If you want to live in the country then it's always a good move to buy acreage. Do not look at it as an investment as the odds are great that it will not appreciate considerably in a normal investment time frame. IMHO the land most worth living on is poor farm land anyway so agricultural gains won't be seen by that land. And the countryside is driven by agricultural markets. Buy the land to walk it, hunt it, and keep the neighbors a goodly distance away. Or to split among your children when they are old enough to build their homes.
" Is there an expected move of capital from those frothy regions to the rural areas, kicking up those prices?"
I'm in northwestern NC, residential RE has "lagged" (3 - 5% appreciation) for years due to textile and furniture offshoring, the former primary industries here. We've had some positive news of late, Dell facility, FedEx hub coming in 2008, tremendous road projects, so it's not looking too bad for the near future.
I've been planning to build on land I purchased over two years ago, and have finally begun construction, so I'm very interested in keeping track of what's going on in residential construction locally. I've made a habit of doing a little "tour" of all the new construction in my area on Sunday mornings, weather permitting. Over the last several months, starting really about June, I've noticed that over half the traffic in the better new subdivisions (3,000+ sq ft, clubhouse, lakes, walking trails, etc. priced out at $350 - $800K), is out-of-state, tags from MD, NJ, PA, NY primarily, with the occasional CA tag (no idea why someone would drive that far, but apparently they do).
Average days on market, for both new and existing combined, is declining here, from 102 last year to 72 currently. There isn't a great deal of spec construction; most homes being built are sold prior to breaking ground in these "better" subdivisions. There are some spec homes that have taken up to a year to sell, but they're invariably at the upper end of the price range, or otherwise ill-considered (location, unpopular style or design elements, overpriced for sq ft and such).
So, I'd say that the "capital" is going to flow into more "reasonably" priced areas of the country before the whole party comes back to earth. Whether that's a good or a bad thing, well, I'm building now as I mentioned, so I view it as providing me with more of a cushion if price actually does take a hit at some point in the future. But, we've got a long way to go, before prices become as out of hand as they are in these former "hot" markets. There are very few properties over $200 sq ft. The few that are, are lakefront or historic mansions in the most desireable, old country club settings in town.