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Is It Still Smart to Invest in Single Family Homes as Rental Properties? Pro Teck’s HVF Examines Different Criteria for Investors

Home Value Forecast includes new top and bottom rankings for the month; Pro Teck participates in 49th Annual NAREE Conference

WALTHAM, MA – June 25, 2015 – Pro Teck Valuation Services’ Home Value Forecast (HVF) June update focuses on whether investing in single family homes as rental properties makes good investment sense.  The HVF findings were presented at the 49th Annual NAREE Journalism Conference in Miami this week.  Also, HVF’s top and bottom market rankings for the month are updated.

“Desirability of location, employment trends, rental yield, home appreciation and other factors should be used in some combination depending on risk tolerance, goal and timeline,” said Tom O’Grady, CEO of Pro Teck Valuation Services.  “For example – an investor that is looking to sell a rental property after a few years would use different criteria than one looking for a long-term investment.”

In the update, the HVF authors examined different criteria including the Price-to-Rent ratio and rental yield.  They also examined a combination of rental appreciation, rental yield, and home appreciation data based off a Deutsche Bank research report, which ranked the top markets for investors, and compared the leading markets to HVF data.

Finally, the HVF authors conducted a simple calculation of theoretical return if you purchased a home and rented out for five years vs. ten years and sold.

“Price-to-Rent ratios, rental yields and/or a combination of all including home price appreciation are all important criteria,” added O’Grady. “Also, investors looking at five-year returns or different ten-year windows dramatically change the results, this is why all criteria must be analyzed to make informed investment decisions.”

This month’s Home Value Forecast update also includes a listing of the 10 best and 10 worst performing metros as ranked by its market condition ranking model.  The rankings are run for the single-family home markets in the top 200 CBSAs on a monthly basis.  They highlight the best and worst metros with regard to a number of leading real estate market indicators including: sales/listing activity and prices, months of remaining inventory (MRI), days on market (DOM), sold-to-list price ratio and foreclosure percentage and REO activity.

“The top ten, actually the top twenty CBSAs this month were all in the west or south west, with the furthest east CBSA being in Texas,” said O’Grady. “There are several new markets in the top ten this month including Portland, Cheyenne, Grand Junction and Colorado Springs.  Also, for the first time in six months, San Francisco is not in the top ten as the number of sales have started to decline.  All of the markets have months of remaining inventory (MRI) less than six months, which is an indicator of a “healthier” market.”

May’s top CBSAs include:

  • Portland-Vancover-Hillsboro, OR-WA
  • San Jose-Sunnyvale-Santa Clara, CA
  • Seattle-Bellevue-Everett, WA
  • Oakland-Hayward-Berkeley, CA
  • Denver-Aurora-Lakewood, CO
  • Sacramento-Roseville-Arden-Arcade, CA
  • San Antonio-New Braunfels, TX
  • Cheyenne, WY
  • Grand Junction, CO
  • Colorado Springs, CO

“The bottom 10 CBSAs are all from the eastern United States,” added O’Grady. “As is expected with the bottom ten markets this month, there continues to be very high months of remaining inventory.  In Atlantic City, which is a new addition to the list, MRI is more than 22 months. In all of the bottom ten markets, foreclosures as a percentage of sales remains more than 25 percent and in Jackson, MI is higher than 55 percent.”

The bottom CBSAs for May were:

  • Gary, IN
  • Fort Lauderdale-Pompano Beach-Deerfield, FL
  • Lake County-Kenosha County, IL-WI
  • Jacksonville, NC
  • Atlantic City-Hammonton, NJ
  • Rockford, IL
  • Hagerstown-Martinsburg, MD-WV
  • Huntington-Ashland, WV-OH-KY
  • Baltimore-Columbia-Towson, MD
  • Jackson, MI

About Home Value Forecast

Home Value Forecast (HVF) is brought to you by Pro Teck Valuation Services.  HVF provides insight into the current and future state of the U.S. housing market, and delivers 14 market snapshot graphs from the top 30 CBSAs.

HVF is built using numerous housing and economic data sources.  The top 750 CBSAs as well as data down to the ZIP code level for approximately 18,000 ZIPs are available with a corporate subscription to the service.  To learn more about Home Value Forecast and Pro Teck’s full suite of residential real estate valuation products, visit www.proteckservices.com.  You can also find Pro Teck on Twitter at @ProTeckServices.

Reporters interested in national, regional or metro level housing data tailored to meet story needs, please email your inquiry to mediarequest@protk.com.

Editor’s Note:

A Core Based Statistical Area (CBSA) is a U.S. geographic area defined by the Office of Management and Budget (OMB) based around an urban center of at least 10,000 people and adjacent areas that are socioeconomically tied to the urban center by commuting.  The term “CBSA” refers collectively to both Metropolitan Statistical Areas (MSA) and micropolitan areas.  Micropolitan areas are based around Census Bureau-defined urban clusters of at least 10,000 and fewer than 50,000 people. Metropolitan Statistical Areas (MSAs) are defined as urban clusters of more than 50,000 people.

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Media Contact:  Janice Daue Walker, JD Walker Communications, LLC
781-290-6528 or jdwalker@jdwalkercommunications.com