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Sorry, Austin and Seattle — your time in the sun may be coming to an end.
That’s according to famous entrepreneur and investor Grant Cardone, who said in an interview with Moneywise on July 20 that he wouldn’t go anywhere near the two markets with anybody’s money.
The markets came up during his Moneywise appearance when Cardone prompted an AI chatbot to answer, “What are the 10 best markets for investing in rental real estate in America?”
The bot spat out, “The best markets for investing in real estate in America can vary depending on factors, such as population growth, job opportunities, rental demand, affordability and potential rental income.”
When the bot then named Austin, Texas, as the best market in which to invest in real estate, Cardone lost it.
“Austin, Texas, is one of the worst markets to be in right now,” he said. “Of all the markets in America, it’s probably the most overbuilt.”
The AI bot went on to list the following remaining cities as the top in America in which to invest in real estate: Dallas, Texas; Nashville, Tennessee; Atlanta, Georgia; Raleigh, North Carolina; Phoenix, Arizona; Tampa, Florida; Denver, Colorado; Charlotte, North Carolina; and Seattle, Washington.
Cardone took issue with a number of the bot’s suggestions, saying, “Those [top] four markets are all on the top five list of the most overbuilt markets,” meaning, in addition to Austin, Dallas, Nashville and Atlanta.
“Real estate is a very fluid thing,” Cardone added.
At the end of March 2023, a Redfin analysis found that housing markets in recently burgeoning tech hubs and places that became popular coronavirus-pandemic migration destinations have been cooling the most quickly compared to other parts of the U.S. The study named Austin as the most rapidly cooling city, followed by Seattle, Phoenix, Tacoma and Denver.
Out-of-town remote workers flocked to Austin during the pandemic for its relatively low real estate prices, lenient COVID restrictions and growing tech sector, with the city’s total home values growing roughly twice as fast during 2021 as the rest of the U.S., according to Redfin.
But the city’s huge run-up is now coming back down, with home sales dropping by 22.4 percent during the first six months of 2023 to 4,490 sales and the median price falling by 10.7 during that period to $545,000, according to Norada Real Estate Investments. During that period, the city’s new listings declined by 2.7 percent and active listings jumped 170.2 percent. Pending sales were down 14.8 percent.
Meanwhile, in Seattle, tech layoffs from companies, such as Amazon, Microsoft and Salesforce have hit the local economy hard, and home sales have seen a drop in response. The number of homes sold in June 2023 was down 23.3 percent year over year to 861, according to Redfin, while the median sale price was down 5.7 percent year over year to $825,000.
Overbuilt markets like the ones Cardone referenced have an oversupply that exceeds demand, which can cause property values to drop and lessen investors’ rental income potential. These factors can also lead to higher vacancy rates, making it more challenging for investors to keep up with mortgage payments and other related expenses.