Where to Move Now: Best Real Estate Markets
Date: May 30, 2016
Most financially savvy people consider home ownership a necessary step in building wealth. After all, wise real estate investing could bring big returns. BiggerPockets.com compiled a list of the best real estate markets for buying single- and multi-family homes in 2015. Whether you buy a property as your primary residence or as an investment to rent out, consider this data before making your move.
Dallas, TX, tops the list of best cities for buyers. The average home price in Dallas was $143,917 in 2014 and $159,533 in 2015 — an 11-percent year-over-year gain. Landlords also enjoyed generous rent returns. The average rent in Dallas was about $1,042 per month. Owners earned almost 9 percent of their home's value in annual gross rents, a ratio known as rent-to-value. Combining the two categories — rent plus appreciation — resulted in a whopping 20-percent return rate for buyers, before expenses.
Denver, CO, experienced the highest home-value appreciation rate. Properties increased by more than 13 percent between 2014 and 2015 in the Denver area with an average home value of $290,900. Rents averaged $1,178 per month. Although the rent-to-value ratio was comparatively low at only 5.5 percent, the high appreciation rate led to a rent-plus-appreciation gain of 18.9 percent.
Miami home values appreciated about 10 percent year-over-year, and rents averaged $1,314 per month. The average home price in Miami was $213,883 and landlords charged 8 percent of the home's value in annual rent. Miami came in third place with a rent-appreciation gain of 18.6 percent.
The Lone Star State has another city that bodes well for buyers. Houston homeowners saw a 10-percent gain in property values. The average home price increased from $143,050 in 2014 to $157,533 in 2015. The average rent barely broke the $1,000 mark and rent values remained relatively high despite the low average home price for the area.
Although Atlanta's appreciation rate fell short of the double-digit mark at 8 percent, the city still ranked among the top five best real estate markets. Average home prices rose from $143,600 in 2014 to $155,217 in 2015. The average rent was just under $1,000 a month, and Atlanta offered a respectable 8.7 percent rent-to-value ratio.
Tampa home values hovered around the $150,000 mark in 2015, up 7.5 percent from 2014. The average rent was $1,025 resulting in a rent-to-price ratio of about 9 percent. Together, rent and appreciation accounted for a 16-percent return on investment.
Detroit wouldn't be a front-runner for best real estate markets if it were not for its high rents relative to home price. The city experienced a 6.5 percent gain from 2014 to 2015. A modest average home price of $115,650 and average rent of $876 per month resulted in a 16-percent rent-plus-appreciation gain.
Scott Trench, a real estate investor at BiggerPockets.com, co-authored the list using Metropolitan Statistical Area (MSA) data from the Department of Housing and Urban Development. According to Trench, a home buyer looking for a residence to occupy can take advantage the same data real estate investors use. "Personally, I choose to buy property as an owner-occupier so long as the property meets all of my investing criteria," says Trench. "In other words, I'll buy a duplex as an owner-occupier if I would have also bought the property as an investor."