*US: Top 100 markets for rental yield & growth

A prominent US market forecasting organisation and a leading real estate investment company have published an interesting research document on the cities in the US with the best investment potential.

The data from HomeVestors of America and Local Market Monitor put Las Vegas (Nevada), Detroit (Michigan), Warren (Michigan) and Orlando (Florida) at the top of the list with Fort Lauderdale (Florida) and Tampa (Florida) both making the top ten.

Commenting on the figures, Ingo Winzer, president and founder of Local Market Monitor, Inc., said:

“Overall, the highest ratings are in markets where home prices have fallen substantially, including Las Vegas, Detroit, Tampa and Phoenix. Home prices in these markets also are below-average, so empty homes are easily turned into competitive rental properties. But there is also extra risk in these markets.

Current rental vacancy rates are 12 percent in Las Vegas, 19 percent in Detroit, 9 percent in Tampa, and 13 percent in Phoenix”.

In Las Vegas, home prices are down 45% since their peak in 2006, according to a news release from the companies. This combined with the fact that many people who work in the casino industry are renters, makes it an attractive market for investors.

Market summaries

The companies publish an insightful summary of the top investment markets.

Las Vegas – Jobs are still being lost and home prices are down 45 percent since the peak in 2006. Rents have dropped 10 percent. Much of the large workforce in the casino industry consists of renters; the homeownership rate is a low 55 percent. The current unemployment rate is 12 percent.
Detroit – Although the recession bottomed out a year ago, the unemployment rate is still high at 11 percent. The population shrank 4 percent since 2006.
Tampa – Largely a retirement market, home prices fell 10 percent in the last year due to the over-supply of investment properties built during the boom. Jobs are growing again in the service industries. Homeownership dropped a sharp 5 percent since 2007.
Phoenix – Jobs are growing again after a very deep recession. Home prices dropped 40 percent since 2006, with rents decreasing just 8 percent. Population growth since 2006 is a strong 8 percent.

Methodology

The research is based on three-year forecasts of home prices (reflecting underlying home-price appreciation potential) and gross rents (as a proxy for potential investor cash flow).

According to David Hicks, the co-president of HomeVestors, the company whose marketing is “We buy ugly houses” says the methodology they used aims to balance the rental returns with the potential for capital growth and the risk of capital loss.

“What we’re looking for is how do you rank, based on the return that you get on the rentals, counterbalanced with the risk and what the price is” he said.

Top 10 investment markets in the US

1.   Las Vegas
2.   Detroit
3.   Warren, Mich.
4.   Orlando, Fla.
5.   Bakersfield, Calif.
6.   Tampa-St. Petersburg, Fla.
7.   Phoenix
8.   Ft. Lauderdale, Fla.
9.   Rochester, N.Y.
10.   Stockton, Calif.

For the full list please click here.

Source: Global edge

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