While homeownership sits at a stagnant level, rental markets remain healthy, creating optimal opportunities for investors, according to a report from RentRange says are ripe for SFR investors.
The SFR market gained traction as a viable asset class with phenomenal growth in 2015. The homeownership rate fell to its lowest level in nearly five decades during the summer as more and more families and individuals chose to rent.
RentRange, a provider of the rental market intelligence reports, recently released data ranking the top 25 U.S. metropolitan statistical areas (MSAs) by average rental rate increase for single-family homes between the fourth quarter of 2015 and the same quarter in 2014. The data also reviewed the average gross yield investors can make from the markets listed.
“The single-family rental market remains strong across the U.S. as the homeownership rate continues to decline and a higher percentage of the population migrates to rental housing,” said Walter Charnoff, CEO of RentRange. “As the real estate market continues to improve, we are seeing significant rental price increases in many markets, which bodes well for investors in this space.”
According to RentRange, markets in Florida, Louisiana, Arkansas, and Tennessee account for eight of the top ten increasing rental markets on the list. The report found that Western markets like California, Washington, and Hawaii occupy nine spots on the top twenty-five list.
"For real estate investors, the rental increases are only half of the full picture they should consider," the report stated. "The gross yield data, which demonstrate income return from an investment prior to operating costs, indicate that markets in the South region are also ripe for investment and account for the highest gross yield percentage returns on the list."
Ranking by Year-Over-Year Rental Rate Increase – Q4
|Rank||MSA||Change in Rent– Q4||Average Gross Yield* – Q4|
|1||Cape Coral-Fort Myers, Florida||25.4 percent||9.0 percent|
|2||Shreveport-Bossier City, Louisiana||19.6 percent||13.3 percent|
|3||New Orleans-Metairie-Kenner, Louisiana||15.1 percent||11.4 percent|
|4||Deltona-Daytona Beach-Ormond Beach, Florida||14.9 percent||10.3 percent|
|5||North Port-Bradenton-Sarasota, Florida||13.6 percent||9.4 percent|
|6||Port St. Lucie, Florida||13.3 percent||10.4 percent|
|7||San Jose-Sunnyvale-Santa Clara, California||12.1 percent||4.3 percent|
|8||Providence-New Bedford-Fall River, Rhode Island-Massachusetts||12.1 percent||6.8 percent|
|9||Little Rock-North Little Rock-Conway, Arizona||11.4 percent||11.4 percent|
|10||Knoxville, Tennessee||11.1 percent||9.6 percent|