It's official! There are only a few other places better than Scranton / Wilkes Barre to buy real estate property. Many of us knew this all along.
Local industry professionals like Realtors and Mortgage Professionals have seen it coming in the form of increased investment activity from the neighboring states of New York, New Jersey, and Connecticut. We've seen residential and commercial property investors from these states come in and buy properties up by the block! These are smart investors who are seeing great gains on their investment
Now, this movement comes to light brought on by a study by the National Association of Home Builders and Wells Fargo. This study was highlighted in an article in The Scranton Times.
The Scranton Times article's study used an interesting index to measure for this study. They used logic. The study looked at the median income of residents and the prices of homes. The idea was to see what percentage of homes were being sold at prices where they could be afforded by residents earning the median income for the area. According to the article, 81.5% of homes being sold were affordable to residents earning at least the median income. Clearly, most of the real estate inventory is affordable for people in the area.
In NEPA (Northeast Pennsylvania), we had a few things going for us in this study. Median incomes aren't bad. If you live here, you'll hear plenty of complaints about our income. It's been difficult to attract large out-of-town companies to come here and stay. However, we've been able to make it happen with companies like Bank of America and Prudential. These companies love our strong work ethic.
From my own observations, I would say that just like any area, there are sections of poor and sections of affluent. I think our affluent segments of the area are plenty. Areas like Clarks Summit and Dallas are full of large homes and large wallets. There is a segment of poor, but I don't feel they are as abundant as other areas. I guess I'm trying to say that our highs are very high, but our lows aren't very low. That allows us to maintain a relatively comfortable median income.
At the same time, our property values and sale prices are not nearly as high as our neighboring states and regions. For many years, the property values of New York and New Jersey soared much faster than incomes. They used creative financing like Option ARM's to land a mortgage payment they could afford. Now the values are crashing as those loans are no longer available to help stretch the buyers' dollar.
Here in NEPA, values never took that initial hike. Scranton / Wilkes Barre was seen as an economically depressed area. The jobs weren't here to allow high home values and prices. We simply couldn't afford them and the Option ARM salespeople were busy making loans in high value areas where they could see substantial profits. Now, things have turned around and this is seen as a great area to be. Since housing prices never took that sharp increase like other areas, we don't have a "bubble" to burst. Housing costs continue to be in line with local incomes.
This poses great opportunities for buyers of real estate. There are families migrating from NJ / NY and even southeastern PA. They are finding that they can buy a similar home to theirs in NEPA at a fraction of the cost they are accustomed to.
The other interested party has been real estate investors. They buy homes in foreclosure or otherwise for pocket change compared to what they are used to paying. They can afford to do major improvements to the property. They use local Property Managers to place qualified individuals in these rental units. They use local Investment Property Mortgage Brokers that know the area and have access to more creative financing. The investors will continue to rent until an exit strategy presents itself.
Investors are pleased because they are buying properties "on the cheap", but they are also pleased for another reason. Their rental pool is perfect! Many people, if not most, in this rental pool can no longer qualify for a mortgage since all the lenders tightened their guidelines. These people must rent instead of having the option to buy. We've talked about the median incomes. Investors are finding that their rental applicants have sufficient income to pay rents. This results in the increase of market rents.
It's a double-whammy for these investors that have been lucky enough to find our little section of the world. It presents an ideal money-making opportunity for people who want to use residential and commercial real estate investments to make their riches. It also presents an excellent opportunity for a family that would like to live in an area where they won't worry about having an unbearable mortgage payment. They can feel free to let their tastes and values determine what type of home they live in. They no longer have to be slaves of their income and settle for a small home so that they can afford it.
