The price of residential real estate has skyrocketed in the past two years. No single reason accounts for this, but several have contributed. Some have sought to find investment properties on the water. According to a recent report, the best place in America to own a beach home is Gulf Shores, Alabama, which is on the Gulf of Mexico between Mobile and Pensacola.
Some of the reasons contributing to the rise in housing prices include rising wealth. The employment and compensation of most middle and upper-class Americans remained fairly high through the two years of the COVID-19 pandemic. Wealth has been helped by a soaring stock market. Many of the same people also became more mobile as companies shuttered offices during the pandemic and employees were asked to work from home. Many will continue working from home, which means they can live where they please.
Another reason is that tens of thousands of people have decided to relocate inland from expensive coastal cities. Home prices in New York and San Francisco can be three times the national average. Many small cities also have lower cost of living, including housing, and a perceived better quality of life. Ironically, the rush to many of these smaller cities has caused their residential real estate prices to surge.
Finally, low mortgage rates have also contributed to residential purchase activity, although it appears the period of low rates has come to an end.
Some Americans, many of them well-to-do, have second homes. They may use them as weekend homes and for vacations. Others use them to make money via rentals. Some use them for both. (This is the hottest luxury home market in America.)
The just-released Best Places to Buy a Beach House 2022 research report from vacation rental manager Vacasa used proprietary and market data to calculate return on investment, or cap rate, for people who rent their homes. The report only considered places that are on a body of water. To find the 10 best places to own a beach house, 24/7 Tempo reviewed the report, ranking places by their cap rate. (These are the cities with the most miles of beach per person.)
The Vacasa report points out that according to a recent report from Redfin, “buyer demand for second homes was up 87% at the start of 2022 from pre-pandemic levels.” Further, based on the Redfin report, “while other areas of the real estate market may begin to normalize, second home sales are expected to remain steady.”
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Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.