HomeUnion Launches First
Investment Housing Market Power Rankings
HomeUnion ranked 31 metros across the country on how well each single-family rental (SFR) market is anticipated to perform
through year’s end for its first Investment Housing Market Power Rankings. Investment markets, like football teams, can be viewed
as having an offense, defense and special teams that are paramount to success. For this study, markets with strong demand drivers
(employment, rent growth, short turnover time) are credited with having strong offenses. On the defensive side of the ball, key
metrics that limit the threat of losing renters (rent-to-income ratio, apartment construction, single-family permits) are favorable.
Cap rates, which are the ratio of net operating income to sales price, were analogous with special teams in the study. These players
take the field at critical times during a game, including last-second field goals, kickoffs and punts. Markets with higher cap rates, or
first-year returns, at midyear were favored over markets with lower rates.
The list of the top 31 “teams” in HomeUnion’s Investment Housing Market Power Rankings are:
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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.
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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
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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.
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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.
PHILADELPHIA
A stingy defense and leading special teams unit were not enough to propel Philadelphia into the top 10. However, the market
should post steady performance during the second half of the year due to limited threats from new supply.
CLEVELAND
This sleeper of a squad features the best special teams in the ranking, which is attractive to yield-seeking investors. Defensively,
the market is also in the top five, but also features one of the lowest-ranked offenses in the league. Nonetheless, it wouldn’t be
a “mistake on the lake” to bet on this SFR market.
BALTIMORE
Baltimore features a well-rounded squad, offering middle-of-the-road offense and special teams, and an above-average defense.
Conservative investors seeking a balanced approach will find this team enticing.
OAKLAND
Oakland’s strong offense will need to work hard to overcome a weak defensive line. Elevated permitting activity and a high rentto-income ratio could encourage renters to double up if costs become prohibitive. Nonetheless, the market will remain an option
for investors seeking appreciation.
CHARLOTTE
Charlotte is one of the most balanced teams in the ranking, with offense, defense and special teams all falling in the top half of
metros. Elevated apartment construction could siphon demand away from SFRs, though healthy demand will enable continued
SFR rent growth.
SAN FRANCISCO
A strong technology sector has created a healthy employment market over the past year, propelling San Francisco’s
offense to the sixth position in the league. However, the market has the lowest cap rates in the nation, and new
apartment construction could have investors sitting – or kneeling – on the sideline.
NEW YORK
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Poor special teams are the primary drag on New York in this year’s ranking. Overall, the market entered the year with sub-4
percent first-year returns, one of the worst in the league. However, extremely tight vacancy and the market’s historically strong
performance will not sway investors with long-term plans.
INDIANAPOLIS
Special teams ranked fourth in the league, giving Indianapolis an advantage over investors seeking to achieve higher initial
returns. A tepid offense, though, could impact the short-term upside of this team.
LOS ANGELES
Although this team is defensively sound, largely due to low levels of new construction, the poor performance of the special teams
unit pulled the market down in the ranking. Average cap rates in the metro were 3 percent entering the season, second only to
San Francisco in terms of low yields.
DETROIT
Normally a special teams powerhouse, investors have shifted their focus to the more expensive Macomb and Oakland
counties, moving average cap rates to the middle of the pack. Although the offense has improved from previous years of dismal
performance, the Motor City hovers in the bottom half of the ranking.
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PHOENIX
Despite having one of the better offenses over the past few years, led by strong employment gains, this year’s team has a belowaverage offense. Combined with a mediocre defense, this SFR market has transitioned from fix-and-flip to a long-term play, so
buyers shouldn’t bet on Phoenix this year.
BOSTON
Once again, Boston features a stingy defense as builders suspend activity in favor of markets where construction costs are less
prohibitive. The offense seems to be missing a spark as employment growth has underperformed.
BUFFALO
Talented special teams might not be enough to support Buffalo this season because of some major issues facing the squad,
including a weak defense that will surely allow opposing teams to score points. Add to that a dismal-looking offense, and 2016
will be a rebuilding year for this Rust Belt city.
WASHINGTON, D.C.
Washington faces some challenges that run deeper than a logo controversy, thanks to tepid job growth and unimpressive rent
growth. When combined with its weak defensive line, which may improve as the year progresses, this team might be a better
pick down the road.
CINCINNATI
Another Ohio team with a standout special teams unit is Cincinnati. Entering the season, cap rates were 7.7 percent, an attractive
proposition for many investors. However, one of the ranking’s worst offenses in a high-scoring league will extend the market’s
playoff drought.
NASHVILLE
As a percent of inventory, apartment construction in Nashville is among the highest in the ranking, which will widen the availability
of rental properties in the market. Further dragging this team down in the ranking is a trifecta of trouble: a weak defense,
mediocre offense and poor special teams performance.
KANSAS CITY
With a weak defense, the season looks like a long one for Kansas City. The skill set possessed by the special teams remains its
one shining star. Investors might want to opt for another Midwest team that has more upside or offers higher first-year returns.
HOUSTON
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Despite having a top-10 defense and a surprisingly improved special teams unit, a weak job market is weighing on this team’s
ability to score points. Builders have decreased permitting activity in the metro year-over-year, and stabilizing energy prices could
make Houston one of the biggest surprises this year.
SEATTLE
An unimpressive defense and bumbling special teams will deafen a strong offense that can make plays, earning Seattle a ranking
near the bottom of our list. Average cap rates are the third lowest in the ranking, giving even overconfident investors pause when
considering this market.
NEW ORLEANS
Defensively, New Orleans is well positioned heading into the year. Unfortunately, scoring points will be a problem for this squad,
while the special teams unit is unimpressive. Overall, things won’t be easy in the Big Easy this season.
MILWAUKEE
31
For a fan base that lives and breathes football, Milwaukee has earned the dubious ranking of 31st on our list of Power Rankings
because of major performance issues shaping the team. An incredibly weak offense makes Milwaukee a poor choice among
investors.
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 Investment
Home Sale Price
Median Investment
Home Rent
Tampa Bay
$126,700
$1,285
6.7%
1
Jacksonville
$127,500
$1,186
6.0%
2
San Diego
$475,000
$2,344
3.2%
3
Dallas
$166,800
$1,431
5.8%
4
Atlanta
Median
Cap Rate
Power
Rank
$111,700
$1,131
6.8%
5
Minneapolis
$173,000
$1,393
5.4%
6
Chicago
$157,000
$1,411
5.9%
7
Pittsburgh
$89,000
$910
7.0%
8
Denver
$320,000
$1,869
3.9%
9
Miami
$210,000
$1,851
5.8%
10
Philadelphia
$150,000
$1,418
6.3%
11
$75,900
$1,124
10.1%
12
Cleveland
Baltimore
$190,200
$1,581
5.4%
13
Oakland
$495,000
$2,532
3.4%
14
Charlotte
San Francisco
New York
$123,500
$1,056
5.9%
15
$1,120,000
$4,026
2.4%
16
$375,000
$1,919
3.9%
17
Indianapolis
$95,700
$1,006
7.1%
18
Los Angeles
$535,500
$2,458
3.0%
19
Detroit
$155,000
$1,230
5.5%
20
Phoenix
$176,000
$1,247
4.7%
21
Boston
$291,000
$1,987
4.3%
22
Buffalo
$120,000
$1,296
7.2%
23
Washington
$300,000
$1,876
4.1%
24
Cincinnati
$90,200
$1,116
7.7%
25
Nashville
$145,000
$1,215
5.6%
26
Kansas City
$95,100
$881
6.4%
27
Houston
$165,300
$1,498
6.2%
28
Seattle
$425,000
$1,999
3.2%
29
New Orleans
$118,400
$826
4.9%
30
Milwaukee
$131,000
$908
4.9%
31
Stacey Corso
Steve Hovland
Communications Manager
[email protected]
Office/Mobile: (415) 672-6460
www.homeunion.com
Director of Research and Communications
[email protected]
Office: (949) 229-8625
www.homeunion.com
Sources: HomeUnion Research Services, MPF Research, a division of RealPage, U.S. Bureau of Labor
Statistics, U.S. Census Bureau
Disclaimer: Information has been obtained through our research and from sources believed to be
reliable, but no representation or warranty is made, expressed or implied, with respect to the fairness,
correctness, accuracy, reasonableness or completeness of the information and opinions. Additionally,
there is no obligation to update, modify or amend the materials contained herein or to otherwise notify
a reader in the event that any matter stated herein, or any opinion, projection, forecast or estimate set
forth herein, changes or subsequently becomes inaccurate. ©HomeUnion 2016
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