It’s been a strange year for real estate, to put it mildly. In the past, you could rely on California dominating the market, but it seems as if its reign might be over. It’s not only over, but it might be handing the crown over to Texas.
April 2018’s “Hottest Markets” report on Realtor.com has shed some light on the changing landscape. This is the month California lost its stronghold on the report. In March, the state held 11 of the report’s 20 spots, but it only had six in April. That’s not the most surprising part of the report, though.
This was the month when San Francisco gave up the top spot to a little-known place called Midland, Texas. Right now, Midland is the hottest spot for real estate in the entire country, and it’s far from the only city in Texas worthy of purchasing real estate. Check out the hottest markets in Texas, and consider buying your new home or investment property in one of them. These markets are most likely to provide you with the type of returns you want when buying real estate.
Midland, Texas – The Up and Comer
Midland has been experiencing a real estate surge since December 2017, when it jumped 13 spots on Realtor.com’s list, all the way up to number 5. It hadn’t made it that far on the list for 30 years, and it made people take notice. Just what is it about Midland that makes it so hot?
First, there’s the activity level. The listings have a lot of activity, and real estate doesn’t stay on the market very long. Basically, the properties get a lot of viewings, and they go like hotcakes.
The market is so hot due to scarcity. Midland is in line with much of the country. It’s experiencing a pretty significant housing shortage, so when a property goes up for sale, people want to buy it as quickly as possible.
It’s not just about demand being bigger than the supply, though. Midland has a lot to offer people, so they want to live in the city. The economy is surging, largely due to the increased production of crude oil.
It’s expected to continue to get hotter, so if you see a property up for sale, buy it if you can. It’s a good choice, even if you don’t want to move to Midland. You shouldn’t have any trouble renting a property here. Everyone wants a piece of Midland, and that includes renters.
Dallas-Fort Worth – The Steady Choice
The Dallas-Fort Worth area is proof a market can be steady and hot at the same time. Dallas-Fort Worth is known for steady economic growth due to the fact it provides the business and financial services for markets all over the state. This means the job growth in Dallas-Fort Worth remains hot, which is good news for people who are looking for work. Much of the state’s market might be cooling, but there always seems to be jobs available in Dallas-Fort Worth.
A strong economy often leads to a strong real estate market, and that’s definitely the case here. In fact, it’s not only one of the strongest markets in Texas. It is one of the strongest in the entire United States. There is a huge demand for both existing and new homes, and sales are projected to grow 6 percent in 2018.
Of course, an increase in sales often means an increase in prices. Prices are expected to go up 5.57 percent, so real estate is likely going to get more expensive.
Once again, this is traced back to supply and demand. In this case, it comes down to the population boom the area has experienced. During the last several years, around 100,000 people moved to the Dallas-Fort Worth area. Those people are filling the 100,400 new jobs created in the region.
Of course, when you have that many new people, it’s hard to find housing for all of them, so prices have gone up. Some expected demand to go down when prices surged, but that’s been far from the case. Demand just keeps getting hotter and hotter.
This is easily one of the best markets for landlords. Renters make up half of Dallas-Fort Worth’s population, so you can buy an investment property and expect to fill it quickly. Just be smart about it if you decide to rent properties to people in Dallas-Fort Worth. You will likely get a lot of rental applications, and you need to do your due diligence. Pull tenant credit reports and run tenant background checks. Also, make sure you have an online rent collection system in place.
Odessa, Texas – The Little Engine That Could
Odessa’s population sits just under 118,000, and its claim to fame is an 8-foot tall statue of Jack Ben Rabbit. Just how did this become one of the hottest real estate markets in Texas? In fact, it’s so hot that it made Realtor.com’s list, sitting ahead of Dallas.
Not really when you give it a closer look. Odessa started as a railroad town, but it eventually turned to energy. It did suffer through the oil bust in the 1980s, but then, it benefited from the shale boom. That boom allowed household incomes to grow at a rapid rate. At the same time, the city invested in alternative energy and aerospace, meaning the economy should remain strong for the long term.
All of this has made Odessa one of the fastest growing cities in the United States, and that growth has led to an interest in real estate. Just like the other markets, demand is high, and supplies are low, which means when a home goes up for sale, it is snatched up quickly. If you decide you want to pick up a rental property here, you need to act quickly. Properties don’t stay on the market for long in Odessa, so act quickly if you’re interested. If you don’t, you likely won’t land a property.
Then, once you do get your property, use free rental advertising to fill it quickly. Then, you can start recouping your investment.
Waco, College Station, and Lubbock – Growth of the College Town
If you’re a landlord, you shouldn’t ignore Waco, College Station, or Lubbock. These college towns offer some exciting investment opportunities for landlords. College students are constantly looking for homes to rent, but that’s only half the story. Savvy landlords seek out faculty and staff to fill their rental properties. Of course, you can’t deny someone an application just because he or she is a student. Instead, you need to buy a rental property that faculty and staff will like. Get something with amenities that faculty and staff will love, and choose a location that’s away from the party scene.
Why should you focus on faculty and staff instead of college students? College students leave every few years, so you will have to deal with vacancies. Faculty and staff are here to stay, so you could end up with a tenant for life. That’s great news as a landlord.
Just remember when you create your free rental application, you cannot specify that you do not rent to students, and if a student applies and meets the criteria, you cannot turn him or her down. You can try to find a property faculty and staff will like, but that is as far as you can go. Students have just as much right to rent the property as long as they meet the criteria.
Austin – The Growth Continues
There has been some talk that Austin’s real estate market is going to go bust soon. It’s experienced rapid growth over the years, and that growth has caused home prices to go up, as well. The fear has to do with the decline in job growth. While the market is still steady, the growth has slowed down. It’s believed that eventually home building will outpace job growth, and that will create a home surplus. Then, a bust will happen.
Maybe it will eventually, but don’t expect it to happen anytime soon. In fact, Austin is expected to be one of the hottest housing markets in 2018. Zillow projects home prices in Austin will go up 3.3 percent in 2018, and the demand will be sufficient enough to fill vacant properties.
This is still a good market to invest in, but you do need to be smart when buying a rental property. You don’t want to flip properties in Austin because you aren’t likely to get a bargain. That means you could lose money on the flip. Also, if you buy a rental property, do not overpay. Rents aren’t expected to increase as much as home values are, so if you overpay on the property, you might have a hard time making the money back. If you do your homework and invest wisely, Austin is a great market for real estate. You might not make as much money as you would in other markets, but it is still solid and should not be ignored.
San Antonio – The Hot Tourist City
San Antonio is one of those markets that you have to love. While the population growth is steady, it isn’t so big that it makes it hard for the real estate market to keep up. Job growth is also on a steady incline, and the economy is fueled by tourism. That’s much less risky than oil, which fuels much of Texas’ economy. There is no reason to think tourism will ever slow down, so the economy should remain strong from one year to the next.
That doesn’t mean prices aren’t on the rise. Supply and demand are still an issue in San Antonio, so real estate prices have gone up to compensate for that. Prices have increased 8.3 percent in the metro area over the last year, and that will likely continue to happen as long as the supply is tight.
This is good news for landlords. The tight supply makes the rental market hot, with around 40 percent of the homes rented out. Rental prices are in line with real estate prices, so you can expect to make money as a landlord here.
Houston – It Might Be the New Hotspot for Renters
Inexpensive housing has been Houston’s real estate claim to fame for years, and there might be more inexpensive property than ever in Hurricane Harvey’s aftermath. Still, most investors are taking a wait and see approach to this market right now.
Property values went down right after the hurricane, but then they went back up. However, homes being built in flood zones are expected to sell for less than they did in the past.
That’s not the only way the market is changing. Now, people who owned homes for their entire lives are renting, and this trend is expected to continue. Some insiders believe the fear of potential flooding means people will be less likely to buy homes.
This could be good news for landlords, but you need to keep something in mind. If you own a property that floods, you will have to deal with the aftermath. If you decide to move forward, ask your renters to get renter’s insurance in case anything is lost in a flood. You also need to make sure the home is protected by a policy of your own.
Are You Ready to Be a Landlord?
These markets are all excellent options for landlords. Buying your property is only half the battle, though. You must protect yourself and your investment. Make sure you use all the tools at your disposal, ranging from residential lease agreements to a tenant portal. These features will help you collect and store data, interact with your tenants, and more. They will save you time and money and make it easier for you to manage your rental properties in Texas. If you want to succeed as a landlord, tenant management tools are a must.
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About the author
Matt Angerer is the Founder and President of VerticalRent. He enjoys writing on a variety of topics that help Landlords, Property Managers, and Renters across America. He is particularly interested in helping renters understand their local marketplace, pick the best places to live, and find an awesome roommate. Since 2011, VerticalRent has grown to service over 100,000 landlords and renters across America.