Los Angeles is far behind at No. 19; San Francisco is No. 16.
FROM THE CALIFORNIA BUSINESS JOURNAL NEWSWIREHomeUnion
, an online real estate investment management firm based in Irvine, Calif., released its first Power Rankings of the top investment housing markets in the United States.
For the study, HomeUnion ranked 31 metros based on how well each single-family rental (SFR) market is anticipated to perform through year’s end. Investment markets, like football teams, can be viewed as having an offense, defense and special teams that are paramount to success.
Markets with strong demand drivers (employment, rent growth, turnover time) are described as having strong offenses. Defensively, key metrics that limit the threat of losing renters (rent-to-income ratio, apartment construction, single-family permits) were deemed favorable.
“We compared cap rates, one of the most important measures of an SFR’s performance from an investment perspective, to special teams, the talented players who take the field at important times during a football game – punting, kickoffs and last-second field goals,” says Steve Hovland, director of research for HomeUnion. “Markets with high cap rates at midyear were favored over markets with lower rates.”
The top 10 “teams” or metros in this year’s Power Rankings and predictions for their performance through year’s end are listed below:
- Tampa: Supported by a league-leading offense, Tampa claimed the top spot in the Power Rankings this year. Heading into the season, employment in the metro was the second highest, while the average turnover time was the fifth-best. Tampa’s 25th ranked defense might be a liability, but the metro should come out victorious in most games, aided by strong special teams.
- Jacksonville: Like its state rival Tampa, Jacksonville also has one of the best offensive lineups, including the third-ranked employment market heading into the season. Heavy permitting activity drags this market’s defense into the middle of the pack, while special teams are above average.
- San Diego: Although low cap rates give the metro one of the worst special teams units, San Diego is expected to be a contender due to strength on both sides of the ball. The metro has the fifth-best offense and a top-10 defense, propelling the market into third spot in the ranking.
- Dallas: Well-balanced on both sides of the ball, Dallas remains one of the best squads in this year’s Power Rankings, supported in large part by an explosive offense. A heavy construction pipeline, however, could injure SFR investors if they choose assets unwisely.
- Atlanta: Talented special teams combined with a strong offense should bode well for this year’s Atlanta team. A middle-of-the pack defense has shown signs of improvement, giving this market good upside potential.
- Minneapolis: The defense appears to be returning to Purple People Eaters form, and is the third-best unit in the ranking. Although both offense and special teams are liabilities, this metro will not need to score a lot of points to provide a strong SFR performance.
- Chicago: The legendary Chicago defense has returned this reason, boosting the Windy City into a top-10 spot in the ranking. Low permitting activity and the best rent-to-income ratio should keep the renter pool stable this year. Offensively, the team falls in the bottom half of the ranking.
- Pittsburgh: The Pittsburgh SFR market enters the season with the ranking’s best defense. A weak apartment construction pipeline will limit competition from multifamily rentals, and permitting is the lowest in the ranking, bringing a steel curtain down on offenses this year. The metro also features a special teams unit that’s among the most elite in the league.
- Denver: The Mile High City’s offense is not expected to lose a step this year, ranking second coming into the season behind strong employment growth and low turnover timelines. Denver will have to outgun their opponents, however, as the Orange Crush is a shadow of its former self.
- Miami: A well-balanced team, Miami slipped into the top 10 of this year’s ranking. One of the tightest vacancy rates in the league results in very low turnover times for vacant units. Median cap rates in the top half of the ranking should be a surprise for investors this year.
Here’s a complete breakdown of each team’s key stats, which are the basis for HomeUnion’s Investment Housing Market Power Rankings:
| Metro |
Median SFR Sales Price 2Q 2016 |
Median SFR Rent 2Q 2016 |
Median Cap Rate 2Q 2016 |
Power Ranking |
|
| Tampa Bay, FL |
$126,700 |
$1,285 |
6.7% |
1 |
|
| Jacksonville, FL |
$127,500 |
$1,186 |
6.0% |
2 |
|
| San Diego, CA |
$475,000 |
$2,344 |
3.2% |
3 |
|
| Dallas, TX |
$166,800 |
$1,431 |
5.8% |
4 |
|
| Atlanta, GA |
$111,700 |
$1,131 |
6.8% |
5 |
|
| Minneapolis/St. Paul, MN-WI |
$173,000 |
$1,393 |
5.4% |
6 |
|
| Chicago, IL |
$157,000 |
$1,411 |
5.9% |
7 |
|
| Pittsburgh, PA |
$89,000 |
$910 |
7.0% |
8 |
|
| Denver/Boulder, CO |
$320,000 |
$1,869 |
3.9% |
9 |
|
| Miami, FL |
$210,000 |
$1,851 |
5.8% |
10 |
|
| Philadelphia, PA-NJ-DE-MD |
$150,000 |
$1,418 |
6.3% |
11 |
|
| Cleveland, OH |
$75,900 |
$1,124 |
10.1% |
12 |
|
| Baltimore, MD |
$190,200 |
$1,581 |
5.4% |
13 |
|
| Oakland, CA |
$495,000 |
$2,532 |
3.4% |
14 |
|
| Charlotte, NC-SC |
$123,500 |
$1,056 |
5.9% |
15 |
|
| San Francisco, CA |
$1,120,000 |
$4,026 |
2.4% |
16 |
|
| New York, NY |
$375,000 |
$1,919 |
3.9% |
17 |
|
| Indianapolis, IN |
$95,700 |
$1,006 |
7.1% |
18 |
|
| Los Angeles, CA |
$535,500 |
$2,458 |
3.0% |
19 |
|
| Detroit, MI |
$155,000 |
$1,230 |
5.5% |
20 |
|
| Phoenix, AZ |
$176,000 |
$1,247 |
4.7% |
21 |
|
| Boston, MA-NH |
$291,000 |
$1,987 |
4.3% |
22 |
|
| Buffalo, NY |
$120,000 |
$1,296 |
7.2% |
23 |
|
| Washington, DC-VA-MD |
$300,000 |
$1,876 |
4.1% |
24 |
|
| Cincinnati, OH-KY-IN |
$90,200 |
$1,116 |
7.7% |
25 |
|
| Nashville, TN |
$145,000 |
$1,215 |
5.6% |
26 |
|
| Kansas City, MO-KS |
$95,100 |
$881 |
6.4% |
27 |
|
| Houston, TX |
$165,300 |
$1,498 |
6.2% |
28 |
|
| Seattle, WA |
$425,000 |
$1,999 |
3.2% |
29 |
|
| New Orleans, LA |
$118,400 |
$826 |
4.9% |
30 |
|
| Milwaukee, WI |
$131,000 |
$908 |
4.9% |
31 |
|
| Sources: HomeUnion Research Services, Bureau of Labor Statistics, MPF Research, a division of RealPage, U.S Census Bureau |
