Top 3 US Housing Markets

October 20, 2011

by jon


Disclaimer: Our lawyers like to make sure we don’t have any fun (shocking, we know). We are not investment advisors, tax professionals, or legal professionals and nothing contained in this post should be considered professional investment advice. We’re just the data whisperers.

We’ve been watching the US housing market on a weekly basis for the past five years. When you run in-depth analysis with a few million data points on a regular basis, you pick up a few things.  Our Mid-Cities Report, published today, confirmed what the trends from the past few months were indicating.  We want to be very clear.

It’s a great time to invest in residential real estate.

Not after the holidays, not after the election, not after you hear it’s a good idea on the nightly news…RIGHT NOW.

There are a variety of online tools to help you understand mortgage math, and finding a local REALTOR who has experience with investment properties is valuable.  We did some number crunching using housing market metrics, rental data, and employment data to determine the top US housing markets for investors.  There are good investment opportunities in most markets right now, and we listed our top three picks below.

Our assumptions:  A median home price, median rental rate, 25% down payment, and a 30-year fixed rate loan at a 6% interest rate.  Given those assumptions, the following markets provide cash-positive investment opportunities.  Great deals can be found in any market, but we’re trying to keep it simple.

Las Vegas
Median home price: $137,930
Median rental rate: $983
Las Vegas got hammered with the housing collapse, and there are some good deals to be found there now.  There’s no state income tax and it’s a popular tourist and convention destination even in poor economic times.  Plus, you gotta love that sunshine.

Median home price: $279,385
Median rental rate: $1681
The Windy City has a very large and diverse economy.  While the median home price is fairly high, the numbers still work.  If you can handle the winters, Chicago is a very strong market for investors.

Median home price: $157,544
Median rental rate: $915
Pittsburgh never experienced a large spike in home prices and has fared well over the past few years as the housing bubble deflated.  The city has a strong economy and also serves as a regional technology hub, providing a steady supply of renters.

An honorable mention goes to Detroit.  The median price for the Detroit MSA makes a purchase with our assumptions cash-flow negative, but there are some VERY low prices on the low-end (“low” as in three-figure and four-figure prices).  There was even a home that sold for $1 in Detroit.  Detroit will be a market to watch as employment there improves, although there are some big hurdles to overcome.

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