Prolific real estate investor Grant Cardone has identified two US real estate markets that he hasn’t touched with a 10-foot pole: Austin and Seattle.
Cardone shared this hot shot — and many others — at Moneywise interview After prompting an AI chatbot to answer the question, “What are the 10 best rental property investment markets in America?”
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A.I. Smith’s response began with: “The best markets for investing in real estate in America can vary depending on factors such as population growth, job opportunities, rental demand, affordability, and potential rental income.”
Up until that point, Cardone—who performed the task live on camera—was only too happy to respond. But when Amnesty International listed Austin, Texas as the best market for investing in real estate, the investment guru exploded.
“Austin, Texas is one of the worst markets right now,” he said. “Of all the markets in America, it is probably the busiest.”
Here’s why a bloated real estate market is bad for real estate investors — and how you still can Invest without risking yourself.
Real estate markets are overbuilt
The top 10 US cities to invest in real estate listed by Cardone’s AI Smith are: Austin (TX), Dallas (TX), Nashville (TN), Atlanta (GA), Raleigh (NC), Phoenix (AZ), Tampa (FLA) ), Denver (Colorado), Charlotte (North Carolina), Seattle (Washington).
But he was not happy with this response.
“These four (top) markets are all in the top five list of busiest markets,” he said, noting that automated chatbots sometimes provide outdated information and require fact-checking.
“Real estate is a very flexible thing.”
Cardone didn’t give a source for his “busiest market” claim but a report from earlier this year Redfin It also listed Austin, Seattle and Denver among the fastest cooling real estate markets earlier this year.
What’s wrong with Austin and Seattle?
Austin was one of the boom cities of the pandemic. It’s skyrocketed in popularity in 2021 and early 2022, with out-of-town workers moving there to take advantage of historically low mortgage rates.
However, the capital of the Lone Star State was now experiencing the calm after the storm. Home sales in the first half of the year fell 22.4% year over year, while the median price fell 10.7%, according to Norada Real Estate Investments.
During the same period, new listings in Austin decreased 2.7%, active listings increased 170.2%, and pending sales decreased 14.8%.
Redvin described Austin as a “victim of its own popularity”. A surge of wealthy homebuyers during the pandemic sent real estate prices soaring, and then a rapid rise in mortgage rates drove people out of the market, driving down demand.
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Meanwhile, Cardone said he “wouldn’t touch Seattle with anyone’s money.”
The Emerald City has been hit hard by the job market. The massive increase in layoffs in the tech sector in the wake of the pandemic — similar to the one in San Francisco — has shaken Seattle’s economy and lowered homebuying demand and competition.
In June, the number of homes sold in Seattle decreased 23.3% year-over-year, according to RedfinHome prices fell by 5.7%.
What does this mean for real estate investors
When the real estate market is in overdrive – whether it’s residential or commercial real estate – it can lead to oversupply, which can drive down real estate values.
As a real estate investor, an imbalance between supply and demand can reduce rental income (and possibly make it more difficult to find suitable tenants) and may result in lower profit margins.
Inflated markets also tend to see job vacancies rise – as seen in the office sector in saturated markets Like New York City — which can cause financial hardship for investors, who must keep up with mortgage payments, maintenance fees, and other costs.
If the hassle of choosing the right market, buying a property, and becoming a landlord doesn’t appeal to you, but you’re still interested in real estate investments, there are other options.
You can invest in a home Real Estate Investment Fund (REIT)They are publicly traded companies that collect rents from tenants and pass them on to shareholders in the form of regular dividend payments.
You could also consider crowdfunding platforms — an operation Cardone supports — that Allowing everyday investors to pool their money To purchase property (or a share of property) as a group.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
