US News and World Report just reported its 10 Cities for Real Estate Steals. Memphis topped the list due to its low price-to-income ratio of 1.17 through the 3rd quarter of 2009. This is a big drop from a high of 5 for Memphis. The current numbers put Memphis significantly below its 15 year average according to Moody’s. Because of this Memphis was named the top city for real estate steals.
Other cities making the list:
- Salinas, CA
- Medford, OR
- Washington, DC
- Mobile, AL
- Las Cruces, NM
- Fayetteville, NC
- Phoenix, AZ
- Fort Worth, TX
- Cincinnati, OH
Moody’s does believe that due to coming foreclosures in Memphis, the bottom may not have been found yet. Of course, attempting to time the market is near impossible. We recently had a couple purchase a fully renovated home priced at $99,500 with 25% down. The home rented for $1200 per month on a 3 year lease (in less than 7 days!). The cost to rebuild this Memphis investment home is $173,000. How much further could the prices fall?
Price to rent ratios fall for 2 reasons; the price of homes declines or incomes rise. The unemployment rate in Memphis is hovering around 9.8% so don’t expect the incomes to rise. To counter the potential for additional foreclosure keep in mind that Memphis has seen a 31% decline in inventory since November of 2007.
Tags: Memphis real estate news
