The Strategy: Buy New in a Job-Rich Region
Source: Time Inc. 2005.
Minimum Investment: $200,000
If the specter of a real estate crash keeps you up at night, here's something to dream about: The biggest construction boom in U.S. history will unfold between now and 2030. According to a new report from the Brookings Institution, nearly half of the residential and commercial structures needed by 2030--about 100 billion square feet--have yet to be built. That estimate includes 60 million new housing units.
So how do you bet smart on the next residential real estate boom? One way is to look at how the nation's top homebuilders size up new markets.
The magic formula centers on job growth, says Bob McLeod, CEO of Newland Communities, the largest residential community developer in the United States. The $4 billion privately held company owns top-selling developments in five red-hot real estate markets--Phoenix, Sacramento, Southern California, Tampa, and the Washington, D.C., area. Before Newland buys a plot of land, McLeod says, the company's researchers pore over job forecasts for the region, looking for a minimum of 5,000 to 10,000 new jobs created annually over a decade. If it's below that, he'll pass.
Nearly as important is job diversity. In the Tampa area, where 30,000 Newland units appreciated an average of 25 percent in 2004 (the average for the region was 10 percent), McLeod expects to continue developing for 10 years, because farming, the military, port operations, and technology are all driving job growth. No single industry dominates, so the pool of potential buyers doesn't dry up if one sector takes a big hit.
So where would McLeod like to break ground next? California's Orange County, Dallas, Houston, and Minneapolis are all on the list, as well as secondary cities like Atlanta, Charlotte, Portland, Ore., and Raleigh. Says McLeod, "All these places are bubble-proof." -- M.V.C.