HomeUnion: Tampa, FL, tops housing investment 'power rankings'

Dive Brief:

  • Comparing investment real estate to football, HomeUnion gave Tampa, FL, the top spot in its first-ever power rankings, thanks to the city's No. 2 employment rate and No. 5 turnover time ("offense"), as well as its strong median cap rate of 6.7% ("special teams"), according to Builder.

  • HomeUnion noted that Tampa scored only 25th in the "defense" categories of rent-to-income ratio, apartment construction and single-family permits, but the city had a median investment-home sale price of nearly $127,000 and a median investment-home rent of $1,285 — both offense positives.

  • Jacksonville, FL (No. 3 for employment, heavy permitting, and above-average cap rates), San Diego (strong in both offense and defense metrics), Dallas (also strong in offense and defense categories) and Atlanta (strong cap rates and offense metrics) rounded out HomeUnion's top-five investment markets ("teams").

Dive Insight:

According to HomeUnion, strong demand drivers, like employment, rent growth and short turnover time can be equated to a football team's offense capabilities. Factors that reduce the risk of losing renters, such as rent-to-income ratio, apartment construction and single-family permits, are analogous to the defense. Cap rates, the ratio of net operating income to sales price, are the special teams. Minneapolis, Chicago, Pittsburgh, Denver and Miami make up the rest of HomeUnion's top 10 spots.

Rentals are in more demand than ever, while the U.S. homeownership rate has fallen to its lowest level since 1965 at 62.9%. Home price growth and limited inventory in many major markets have kept renters from becoming homeowners. The Urban Institute reported in June that only six new homes were being built for every 10 new households.

Healthy rent growth has also made it more difficult for renters to save for a down payment, particularly the younger demographic, many of whom have student loan debt. However, inventory has become an issue in the multifamily sector. The median rent for the most affordable apartments is rising faster than rents in the overall market, primarily due to developers devoting their resources to luxury rental construction. According to Zillow Chief Economist Svenja Gudell, builders need to increase lower- and middle-tier apartment construction, where demand currently outpaces supply.

The full list of HomeUnion's market rankings are:

  1. Tampa
  2. Jacksonville, FL
  3. San Diego
  4. Dallas
  5. Atlanta
  6. Minneapolis
  7. Chicago
  8. Pittsburgh
  9. Denver
  10. Miami
  11. Philadelphia
  12. Cleveland
  13. Baltimore
  14. Oakland, CA
  15. Charlotte, NC
  16. San Francisco
  17. New York
  18. Indianapolis
  19. Los Angeles
  20. Detroit
  21. Phoenix
  22. Boston
  23. Buffalo, NY
  24. Washington, DC
  25. Cincinnati
  26. Nashville, TN
  27. Kansas City, MO
  28. Houston
  29. Seattle
  30. New Orleans
  31. Milwaukee, WI

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Filed Under: Residential Building Economy
Top image credit: Cal Dellinger