New homes sold at a rapid pace in October, sending competition for owner-occupied and investment housing across the country soaring to new highs. According to a late November report by the Commerce Department, new home sales last month rose 6.2% to a seasonally adjusted annual rate of 685,000, the third-straight monthly gain and the best clip since October 2007. The Midwest reported a significant portion of transaction growth, with the South and West posting smaller gains. When narrowing down that data to home sales for investment purposes, they also soared in the Midwest from 2016 to 2017, according to HomeUnion® Research Services.
HomeUnion®’s Research Services and Data Science teams recently analyzed two years of sales data on single-family rental (SFR) properties nationwide to give investors a competitive edge as prices continue to rise and inventory is scarce. Investor migration patterns and preferences since the beginning of 2016 through today in metros on HomeUnion®.com were analyzed for this study.
Chicago captured the top spot, followed by Atlanta. The number of home sales for investment purposes in Chicagoland jumped 30.4 percentage points from 2016 to 2017 as more than half of single-family transactions had absentee owners. Meanwhile, the number of homes for sale for investment purposes in the Atlanta metro increased 6.9 percentage points during the same time period.
Chicago tops the list.
Rental properties in these metros are trading at a faster rate than before as their local economies continue to grow, the cost of living is lower than it is in most coastal metros, and median local incomes are keeping pace with home values. Opportunistic investors may find higher first-year yields and a greater selection of SFR inventory in Chicago and Atlanta before year’s end. Now is an excellent time to invest in real estate with leverage before interest-rate hikes are likely approved by FOMC in mid-December, though warm-weather markets are generally easier to renovate and tenant during winter months.
Tampa and Orlando landed at the bottom of HomeUnion®’s list of the fastest-moving investment housing markets. The number of home sales for investment purposes in the Tampa Bay region fell 6.4 percentage points from 2016 to 2017, while SFR sales declined 2.7 percent in Orlando during this time frame. “Higher prices are pushing some vacation home buyers to the sidelines in many popular Florida markets. Investors are also becoming more selective when choosing assets in these booming Florida markets,” Hovland says. Nonetheless, investors armed with data-driven due diligence can find excellent opportunities in these Florida markets, particularly as competition inches lower.
Below is a list of the fastest-moving single-family rental investment markets on HomeUnion®.com:
Percentage Point Increase in Investment Home Sales: 2016 to 2017
Percentage Point Decline in Investment Home Sales: 2016 to 2017
To find cash-flowing real estate investments before inventory dries up in your preferred market, contact one of our Solutions Managers today.