The California real estate market is home to some of the most profitable real estate markets in the US. Unfortunately, some of these cities are driving investors and residents away. How are these migration trends related to real estate market trends and where are residents heading? That’s what this blog is all about.
Issues with the California Real Estate Market
It’s no secret that the California real estate market has a worrying affordability problem. Median property prices in The Golden State rank among the highest in the US year after year. While many factors may be attributed to this issue, the problem arises from the most basic principle in economics: supply and demand. Simply put, the California real estate market has suffered from a very short supply relative to its very high demand. The result is a housing market with expensive property prices. These California real estate market trends have significantly influenced the state’s status of having the second most expensive cost of living in the US.
Nonetheless, there are some hidden gems in the California real estate market with an affordable investment property being the norm. Two examples include Joshua Tree and Long Beach. To start searching for an affordable investment property in these cities, click here!
Related: Investing in Joshua Tree Real Estate: An Unexpectedly Good Opportunity
California Real Estate Market: San Francisco
The most alarming example of an overpriced city in the California real estate market is San Francisco. Here is the city’s market data, according to Mashvisor’s investment property calculator.
Median Property Price: $1,572,614
Price Per Square Foot: $983
Traditional
Rental Income: $4,732
Cap Rate / Cash on Cash Return: 1.1%
Airbnb
Rental Income: $6,841
Cap Rate / Cash on Cash Return: 2.11%
Occupancy Rate: 73%
While San Fran is an extraordinary location in terms of profitability, even for the California housing market, there is a huge tradeoff that comes in the form of lack of affordability.
Where Are San Franciscans Going?
So, where are residents of San Francisco moving to? According to multiple sources, the top two destinations are the Denver real estate market and the Austin real estate market. While specific reasons may vary, there is one central reason why San Franciscans are looking to invest in Denver real estate and Austin real estate: affordability. According to Mashvisor’s investment property calculator, the median property price in the Denver real estate market is $467,937 and that of the Austin real estate market is $509,899. Compare these prices to the median property price of over $1.5 million in San Fran, and these migration trends suddenly make a lot of sense.
Not only are real estate investors enjoying an affordable investment property in these two markets, but the overall cost of living is also much more inexpensive compared to the San Francisco counterpart. The costs of living in Denver and Austin are a whopping 41% and 48% lower than San Francisco’s, respectively. The lower cost of living and more affordable property prices make the Denver real estate market and the Austin real estate market some of the best markets to watch for 2019. Speaking of which, these two markets are already expected to be among the top 10 markets in 2019, according to a report by the PWC.
Denver Real Estate Market
Aside from its affordability, there are multiple reasons why investors are interested in the Denver real estate market. The average Denver investment property is a very profitable one, as you can see from the data provided by Mashvisor below.
The success of the Denver real estate market is largely influenced by the city’s booming economy. For instance, Forbes has listed the city as the best US city for businesses and careers. The Denver real estate market also thrives from its Airbnb market, as over 32 million tourists visited the city the previous year. Airbnb is also fully legal in the Denver real estate market.
Overall, the Denver real estate market is an affordable and versatile market for real estate investing. The average Denver investment property has the following data:
Median Property Price: $467,937
Price Per Square Foot: $275
Traditional
Rental Income: $2,043
Cap Rate / Cash on Cash Return: 2.09%
Airbnb
Rental Income: $3,462
Cap Rate / Cash on Cash Return: 4.01%
Occupancy Rate: 66%
Related: Everything You Need to Know About the Denver Housing Market 2018
The best location to invest in Denver real estate is Chaffee Park.
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Chaffee Park
Median Property Price: $389,920
Price Per Square Foot: $259
Traditional
Rental Income: $1,874
Cap Rate / Cash on Cash Return: 2.25%
Airbnb
Rental Income: $4,274
Cap Rate / Cash on Cash Return: 6.66%
Occupancy Rate: 79%
Austin Real Estate Market
The second market benefiting from San Francisco’s migration trends is the Austin real estate market. Much like the Denver real estate market, the Austin real estate market is both very affordable and very profitable.
The recent surge in the Austin real estate market is also partly due to its surging economy, which was ranked number one in the US, by a recent report. The Austin real estate market is the Texan king when it comes to Airbnb, as the city received about 30% of all arrivals to the state in 2017. Airbnb is also fully legal in the Austin real estate market.
These reasons, and many more, are what make the Austin real estate market among the markets to watch for 2019. Below is the average data for an Austin investment property, compiled by Mashvisor’s investment property calculator.
Median Property Price: $509,899
Price Per Square Foot: $278
Traditional
Rental Income: $1,909
Cap Rate / Cash on Cash Return: 0.47%
Airbnb
Rental Income: $2,956
Cap Rate / Cash on Cash Return: 1.85%
Occupancy Rate: 47%
The average traditional cash on cash return for the city is low. However, with Mashvisor’s Property Finder, you can find investment property with much higher ROI. Click here to check out the list of top performing properties.
Related: 4 Reasons to Buy Airbnb Investment Property in Austin
The best neighborhood to invest in Austin real estate for long term rentals is Franklin Park.
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Franklin Park
Median Property Price: $249,142
Price Per Square Foot: $129
Traditional
Rental Income: $1,666
Cap Rate / Cash on Cash Return: 1.87%
The best neighborhood to invest in Airbnb Austin is Wells Branch.
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Wells Branch
Median Property Price: $288,126
Price Per Square Foot: $154
Airbnb
Rental Income: $2,811
Cap Rate/Cash on Cash Return: 4.24%
Occupancy Rate: 39%
To start investing in the California real estate market, Denver real estate market, Austin real estate market, or any other market in the US, click here to start your 14-day trial with Mashvisor!