Reader Question of the Week: Where is one to invest in this market inclusive of the banks shadow inventory? A good example is Clarksville, Tennessee which appears to be an excellent opportunity, however if you consider Housing and Urban Development (HUD) unoccupied housing information, it paints a very different picture
Monty’s Answer: Unoccupied housing is a serious problem and the meltdown in the real estate market from 2007 forward has a lingering effect on it. Because there is not a standard definition as to what constitutes an unoccupied home the size of the unoccupied home inventory is fuzzy.
Here is how HUD describes the issue: “The absence of universal definitions of vacancy and abandonment complicates efforts to assess the number of vacant and abandoned properties nationally. The best aggregate sources include the U.S. Census Bureau and the U.S. Postal Service, although these are not without limitations. Using these 
sources, the U.S. Government Accountability Office (GAO) reported in 2011 that vacant residential units, not including those used seasonally or by migrant workers, increased from 7 million in 2000 to 10 million in 2010.4 The Joint Center for Housing Studies of Harvard University reported that a subset of this category, homes vacant and not being marketed for sale or rent, reached a record high of 7.4 million in 2012, with increases concentrated in the high-foreclosure areas of the South and West.5 Although vacant homes can be found throughout the country, they tend to be concentrated; nearly 40 percent of the nation’s vacant homes are located in just 10 percent of all census tracts. More than half of the census tracts with vacancy rates of 20 percent or higher were in just 50 counties, most of them in metropolitan areas. Wayne County in Michigan and Cook County in Illinois, for example, each have more than 200 high-vacancy neighborhoods.” For more information about unoccupied homes click here.
According to this year old CoreLogic article, the shadow inventory is rapidly disappearing and a search of the HUD property for sale website for Clarksville indicates fourteen properties currently for sale. It is unclear in your question the source of the data that you are questioning.
Redirect your thinking
The answer to your “Where to invest” question will not require much time on my part, or your part, and will possibly lead to thinking about the solution differently. It will work most anywhere in the United States.
Every community has it’s differences from all other communities. Whether it is geography, economic, demographic or something else, there are point that make each one unique. Either one of us can identify residents or investors who are highly successful in each of these communities, and others who have not done so well.
Studies, public information and surveys ultimately commingle the numbers to establish averages or median statistics. This can be helpful information to have, but can be inconsequential if overpaying for a property. Your question is ultimately about you as an individual. Your individual results, when compared to the masses, can be amazingly different.
Another simple way to learn about real differences in markets is to speak with business owners that operate in separate, but similar markets. Retail type businesses such as home improvements, jewelry or swimming pools just to name a few. I recall a conversation I had some years ago with a carpet company executive discussing the differences between two cities in the same region. His answer was, “In the city “A” customers pay up to $20 a yard for carpet. In city “B,” $20 per yard is the starting price for carpeting.” They are less than 50 miles apart.
Focus on the basics
Understanding the fundamentals of negotiating, real estate investment and appraisal techniques are the most valuable skills toward achieving success in real estate.
Real estate as an investment is a business where the people that prosper have a keen eye for creating value, regardless of the demographics. They seem to know which way the city is expanding and what types of investment a neighborhood needs. They are extremely good at listening to many opinions and theories and boiling down to the answers for future outcomes from those conversations. They know how to find the players whose opinions have the most strength. Yet, sometimes they are just plain lucky.
They start out small, or in a partnership with an experienced investor.
They gather their insights over extended periods of time and they become familiar with property sales and the differences between properties and their locations. This is a key to understanding real estate value. Understanding that one makes money in real estate when it was purchased, not when it is sold. This does not mean buying for less than market value. It simply means buying in neighborhoods where values will appreciate in the future.
It will not make much difference which market you chose. My answer is to choose the market you feel the most comfortable spending time around.
This may not be the answer you were looking for, but in my opinion, your question is better answered in this fashion.
It is what I believe. I hope it is helpful. Ask me other questions.
“Richard Montgomery gives no nonsense real estate advice to readers most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.”
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