Best places to buy real estate in the US: West

In the dynamic and varied landscape of the Western United States, foreign investors are discovering a wealth of real estate investment opportunities. This region, stretching from the tech hubs of California to the scenic vistas of the Pacific Northwest, is renowned for its vibrant cities, natural beauty, and robust rental market. For investors from Canada, the U.K., Latin America, and beyond, a deep understanding of the local market dynamics is essential.

This guide aims to illuminate prime locations across states like California, Washington, and Arizona, focusing on essential metrics such as rental yields, property prices, and demographic shifts. Delving into these elements is key to grasping the nuances of foreign investment in U.S. real estate, whether you're exploring the bustling epicenters like Silicon Valley or seeking affordable yet safe places. This exploration serves as a tailored guide for investors at all levels, from the young and aspiring to the experienced, highlighting areas with high potential for return and offering a roadmap to navigate the promising Western U.S. real estate market confidently.

When investing in real estate in the Western U.S., it's crucial to consider various key metrics, tailored to different types of investors. Here's an adapted guide based on the latest 2023 data:

Population Growth and Demographics

• Western cities like Seattle and Denver are experiencing population growth, signaling a vibrant real estate market. This growth is driven by their booming tech industries and appealing lifestyles, making them attractive for rental demand.

Gross Rental Yield

• The Western U.S. has seen a steady increase in rental yields, particularly in areas like Phoenix and Las Vegas. This trend is attracting high net-worth investors seeking lucrative opportunities in rental properties.

Average Rental Prices

• Cities such as San Francisco and Los Angeles, known for their higher rental prices, may offer substantial returns, aligning with the goals of both high-net-worth and medium-income investors.

Average Mortgage Payments

• States like Oregon and Nevada offer relatively lower mortgage rates, which can be advantageous for new investors entering the market.

Vacancy Rate

• Lower vacancy rates in cities with growing job markets, like San Diego and Portland, indicate a healthy demand for rentals, appealing to all types of investors.

Housing Price Index 5-Year Growth

• This metric provides insight into the long-term value appreciation of properties. The Western U.S., especially in states like Colorado and Washington, has seen significant growth, crucial for medium-income investors focused on secure, long-term growth.

Median Home Sold Price

• Understanding market entry points is essential, especially for new and young investors. Cities like Salt Lake City offer more affordable options while still providing growth potential.

Employment and Wage Growth

• Regions with strong job markets, like the Silicon Valley area, offer stability, making them attractive to medium-income and new investors.

How real estate investors evaluate property in the U.S

In the Western U.S., the real estate market offers diverse opportunities, each appealing to different investor profiles. In 2023, the region faces a unique set of market conditions and trends that impact these investment opportunities.

1. High Net-Worth Real Estate Investors

• Focus Area: Luxury Properties, High-Growth Areas
• Key Metrics: Rental Yield, Property Appreciation, Economic Growth
• Preferred Locations: Seattle (WA), San Francisco (CA), Denver (CO)

High net-worth investors in the Western U.S. might target areas like Seattle, San Francisco, and Denver, known for their tech-driven economic growth and luxury property markets. These cities offer the potential for both rental yield and property appreciation. In such markets, keeping an eye on demographic trends and economic indicators is crucial to identify emerging neighborhoods and sectors.

2. Medium Income Real Estate Investors

• Focus Area: Stable Markets, Secure Investments
• Key Metrics: Property Stability, Rental Demand, Local Economy
• Preferred Locations: Portland (OR), Salt Lake City (UT), Phoenix (AZ)

Medium-income investors should consider stable markets like Portland, Salt Lake City, and Phoenix. These cities offer a balance of rental demand and economic stability, making them prudent choices for long-term investment. Monitoring local economic trends and housing market forecasts can help these investors identify areas with steady growth potential.

3. New/Young Real Estate Investors

• Focus Area: Affordable Properties, Emerging Markets
• Key Metrics: Affordability, Population Growth, Job Opportunities
• Preferred Locations: Boise (ID), Tucson (AZ)

New or young investors often prioritize affordability and growth potential. Cities like Boise and Tucson offer opportunities in markets where population growth and job opportunities are on the rise. These areas are ideal for those looking to enter the market, with a focus on smaller, more affordable properties.

Source: realtor.com

Market Trends:

• Home Price Moderation: The Western U.S. is experiencing a moderation in home price growth, with a forecasted median price appreciation of around 5.4% in 2023.
• Rent Growth: After a period of double-digit increases, rent growth has slowed but remains strong. The national forecast predicts a 6.3% rent growth over the next 12 months​​.
• Vacancy Rates: The rental vacancy rate has stabilized at historically low levels, around 5.6% to 6.0%, indicating a healthy demand for rentals.

These insights into the Western U.S. real estate market provide a foundation for investors to align their strategies with the current market conditions, ensuring they capitalize on the unique opportunities presented by this dynamic region.

The Western U.S. rental property market in 2023 presents a nuanced picture with varied trends across different regions and property types. Here's an in-depth analysis:

In May 2023, the rental market in the Western U.S. witnessed a notable shift. For the first time since trend data began in 2020, there was a year-over-year rent decline for 0-2 bedroom properties, averaging at -0.5%​​. The median asking rent in major metros was $1,739, showing a slight increase from the previous month but a decrease from its peak in July 2022.

Rental Price Increase Rates Different property types experienced varied rent increase rates. While rent for 2-bedroom units declined by 0.5%, studio rents increased by 2.0%, and 1-bedroom units saw a modest rise of 0.4%​​. This indicates a shift towards smaller, more affordable units in response to economic pressures.

Top Areas and Market Comparisons In contrast to the Northeast, where rental rates continued to grow, the Western region saw a decrease in median rents by 3.0% year-over-year. San Jose, CA, was an exception with a 1.0% growth, but this was significantly lower than its previous year's rate​​.

Secondary Housing Market vs. New Construction The secondary housing market, comprising existing homes and apartments, is facing competition from new construction. In the first quarter of 2023, the West saw a surge in newly completed multi-family units, with non-single-family homes completed at an annual rate of 147,000 units, nearly doubling the pace from the previous year​​. This increase in supply, coupled with high mortgage rates and housing prices, is leading to a trend where fewer renters are considering buying homes, thus staying longer in the rental market​​.

Future Outlook The rental market is expected to see a small annual decline in median asking rents by about -0.9% in 2023. Despite this, rental prices remain high, challenging affordability for many renters​​. The increase in rental supply is likely to continue, but it's not expected to reach pre-pandemic levels this year. This situation may lead to a decrease in renter mobility, as the costs and growth rates between new rentals and lease renewals create a strong incentive for tenants to stay in their current residences​​.

Overall, the Western U.S. rental property market in 2023 is characterized by declining rental rates, an increase in new construction, and a sustained demand for rental properties, particularly in more affordable markets.

Source: realtor.com

Best cities in the US for Real Estate Investment (West)

For foreign investors seeking profitable opportunities in the Western United States, several cities stand out in 2023. These cities offer a mix of economic vitality, demographic appeal, and investment potential, making them ideal for investment, especially for those from Canada, Latin America, and other regions.

Boise, Idaho

• Home Value Index: $528,900
• YoY Home Price Growth: -2.9%
• Rent Index: $1,200 (estimated)
• Job Growth Rate: Strong, particularly in tech and healthcare
• Population Growth (2013-2023): Steady increase
• Attractions: High quality of life, outdoor recreational opportunities
• Notable: Top 10% nationally for real estate appreciation over the past 10 years.

Boise is emerging as a preferred destination for real estate investors due to its strong job market, affordable housing, and stable real estate market. The city has experienced significant real estate appreciation, with a home appreciation rate of 166.42% over the past decade. Moreover, Boise's economy is thriving with sectors like technology and healthcare driving growth, attracting new residents, and boosting housing demand.

Los Angeles, California

• Home Value Index: $999,000
• YoY Home Price Growth: 7.1%
• Rent Index: $2,222
• Job Growth Rate: Strong, entertainment and media industry
• Population Growth (2013-2023): .23% increase year-over-year
• Attractions: Entertainment and media hotspot
• Notable: High property prices but a strong rental market.

As California's largest city and a major entertainment and media hub, Los Angeles continues to experience population growth and high demand for housing. Despite high home prices, the city's rental market is strong, offering opportunities for both rental income and capital appreciation. However, investors should be aware of local landlord-tenant laws, which may influence investment strategies.

Sacramento, California

• Home Value Index: $475,000
• YoY Home Price Growth: 5.3%
• Rent Index: $1,756
• Job Growth Rate: Attracting young professionals
• Population Growth (2013-2023): Predicted to grow 54% by 2060
• Attractions: Hip "farm-to-table" community
• Notable: Potential in vacation home market in nearby Elk Grove.

California's capital city is drawing young professionals, contributing to a consistent demand for housing. Sacramento's "farm-to-table" community appeal and predicted population growth make it an attractive market for real estate investors. The city offers a balance of small-town atmosphere and urban amenities, with nearby Elk Grove also being a lucrative area for vacation home investments.

Fresno, California Home Value Index: $389,000 YoY Home Price Growth: Data not specified Rent Index: $1,258 Job Growth Rate: Strong, driven by agricultural industry Population Growth (2013-2023): -1.3% Attractions: Thriving agricultural sector Notable: Affordable entry point into California's market, high rental rate increase.

Offering a more affordable entry point into California's real estate market, Fresno's thriving agricultural industry creates a consistent demand for rental properties. The city has seen a significant increase in rental rates and property appreciation, making it an appealing option for investors looking for value deals.

San Francisco, California

• Home Value Index: $1,300,000
• YoY Home Price Growth: Data not specified
• Rent Index: $3,188
• Job Growth Rate: High, with hourly wages $10 above the national average
• Population Growth (2013-2023): .15% increase year-over-year
• Attractions: Major economic and cultural center
• Notable: High investment yields higher cash flow, and a strong economy.

San Francisco's real estate market is marked by high property prices but offers substantial rental income and cash flow opportunities. The city's economy is one of the largest in the nation, and its low unemployment rate and high hourly wages contribute to a strong demand for housing. Although the initial investment may be high, the potential for returns is significant.

Real estate investment opportunities in the U.S. for foreigners (West)

From an international investment perspective, Canada and Latin American countries are notable contributors to foreign investment in U.S. real estate. In 2023, Canada accounted for 10% of foreign buyers in the U.S., investing around $6.6 billion. Mexican buyers, representing 11% of foreign buyers, invested $4.2 billion, while Colombian buyers accounted for 3% of the foreign investment at $0.9 billion​​. The Western U.S., particularly California, remains a top destination for these investors, alongside Florida and Texas.

This analysis provides a snapshot of the most attractive cities for real estate investment in the Western United States as of 2023. These cities offer a range of opportunities for foreign investors from Canada and Latin America, catering to different investment strategies and goals.

Investing in U.S. Real Estate in 2023 (West)

In 2023, the real estate market in the Western U.S. is a great opportunity for investors, especially those from Canada, Latin America, and the U.K. Cities like Boise, Las Vegas, and San Francisco are excellent choices. They offer a mix of strong job markets, a growing population, and good rental opportunities. This makes them ideal places for buying property, whether for high-value homes or affordable investments. The Western U.S. is attracting investors from all over the world. Its stable growth, increasing property values, and new development projects make it a top region for real estate investment. For investors, this area offers a chance to grow their money in a diverse and dynamic market. It's a strong option for expanding their real estate investments.

FAQs Frequently asked questions about Real Estate Investment in the US for Foreign Investors (Western US)

Q: Where are (some of) the best places to buy rental property in the Western U.S.? A: Boise, Las Vegas, Los Angeles, Sacramento, and San Francisco are top choices due to their economic growth, rental market potential, and diverse investment opportunities for foreign investors.

Q: Which states in the West are among the best for real estate investment? A: California, Arizona, and Nevada are highly recommended for their strong job markets, population growth, and diverse real estate markets, making them attractive to foreign investors.

Q: Where are the least expensive places to live in California? A: Cities like Fresno offer affordability with the potential for real estate appreciation, making them appealing to budget-conscious foreign investors.

Q: Which areas offer affordable costs of living and high levels of public safety in Arizona A: Cities like Gilbert and Chandler balance affordability with safety and strong community amenities, ideal for foreign investors looking for secure investments.

Q: Can foreign nationals from Canada and Latin America make money in real estate investing in the U.S.? A: Yes, states like California and Arizona are particularly attractive due to their dynamic markets and international appeal.

Q: How can young investors from the UK and South America invest in U.S. real estate? A: By focusing on emerging markets with strong growth potential, such as Boise and Las Vegas, young investors can tap into areas with high return prospects.

Q: What are our top U.S. cities for Colombians and Brazilians to invest in real estate? A: Cities like Las Vegas and San Francisco, known for their vibrant economies and cultural diversity, offer lucrative opportunities for Colombian and Brazilian investors.

Q: How does foreign investment in U.S. real estate work for investors from Chile and Argentina? A: It involves understanding local market trends, and property laws and often requires collaboration with local real estate experts for successful investments.

Q: Which Western cities offer (some of) the best opportunities for Venezuelan real estate investors? A: Reno and Seattle offer growth opportunities, with a balance of strong economic indicators and lifestyle appeal for Venezuelan investors.

Q: Are there specific advantages for Canadian investors in Western U.S. real estate markets? A: Yes, especially in states like California and Nevada, where Canadian investors can benefit from diverse property types, strong rental markets, and potential capital appreciation.

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.