Posted by JT-IN on January 25, 2006 at 15:00:38:
Undervalued does NOT necessarily imply that it is one of the BEST markets… Undervalued is simply the authors interpretation of their criteria… which is based on a formula of housing costs versus median income… This simplistic view leaves lots of room for error, in their analysis.
Now I know nothing of El Paso, TX, and it could be wonderful, but something tells me that it isn’t. I don’t think that it will suddenly become “fair valued”, or above par, which is the only thing that would then have made it a good place to invest. I have a sense that some of the contributing factors that have caused it to be undervalued, will continue…
Another genious, who likely has never invested in RE other than the purchase of a personal residence, will write an article and tell us why it is now 30% undervalued. An investor would then interpret that to mean that they lost money on the purchase, due to property selling at a lower cap to medium income. So in the end, those articles mean nothing…
Conversely, those same articles have being written about HOT markets over the past 5 years being overblown… The simple conclusion would then be, “overvalued… I better not invest there.” If that was the approach then the investor had been influenced by a person who had no knowledge as to why the market increased, and would have missed out on 5 years of exceptional appreciation.
So be careful which Tea Leaves you read… and the meaning of them… is the moral of the story.