5 best and worst rental return markets | 2014-04-01 | HousingWire



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Home prices have increased year-over-year for two years straight and do not show any signs of slowing down, the latest CoreLogic report revealed. So how does this impact the rental community and investors?


While strong cash-flowing rentals are in many U.S. markets, rising home prices are slowly put a dent in the value.

This follow a strong rise in demand for REO-to-rental securitization.


RealtyTrac composed a list of the 5 best and worst markets for rental returns.


The list was created by taking the 2014 fair market rent for a three-bedroom home multiplied by 12 months and then dividing that 12-month total by the median sales price of residential properties in the county.


Here is what they came up with:



5. Baltimore City County, Md.


Media sales price: $85,000


The average fair market rent sits at $1,599, and the annual gross yield is 23%.


4. Bibb County, Ga.  


Median sales price: $50,880


On the lower end of the best five, the average fair market rent is $1,008 and the annual gross yield is 24%.


3. Washington County, Miss.


Median sales price: $42,000


The county’s average fair market rent comes in at $862, posting a 25% annual gross yield.


2. Clayton County, Ga.


Median sales price: $50,750


Ranking in at number two, Clayton’s average fair market rent is $1,187, and the annual gross yield is 28%.


1. Wayne County, Mich.


Median sales price: $44,900


As the best rental market for rental returns, Wayne County posts an average fair market rent of $1,124 and an annual gross yield of 30%.


Now for the 5 worst markets for rental returns:


5. Marin County, Calif.


Median sales price: $745,000


The average fair market rent sits at $2,657, while the annual gross yield comes in at 4%.


4. Kings County, N.Y.


Median sales price: $573,000


One of two New York markets on the list, Kings County reported an average fair market rent of $1,852 and an annual gross yield of 4%.


3. San Francisco County, Calif.


Median sales price: $573,000


Significant above number 4, the average fair market rent hit $2,657, with a 4% annual gross yield.


2. Eagle County, Colo.


Median sales price: $525,000


This Colorado market recorded a $1,545 average fair market rent and a 4% annual gross yield.


1. New York, N.Y.




Median sales price: $887,000


Holding the spot for the worst market for rental returns, New York posted a $1,852 average fair market rent and a 3% annual gross yield.


Worst rental affordability crisis that this country has known – Yahoo Homes




Since the housing crisis began in 2008, approximately 4.6 million homes were lost to foreclosure, according to CoreLogic. The vast majority of those homeowners became renters. Even as housing recovered, credit tightened, pushing even more potential buyers out of homeownership and into rentals, both apartments and single-family rental homes.

There are now 43 million renter households, or 35 percent of all U.S. households, the highest rate in over a decade for all age groups, according to Harvard’s Joint Center for Housing Studies; 4 million more renters today than there were in 2007. For those aged 25 to 54, rental rates are the highest since the center began record keeping in the early 1970s.

As a result, rental vacancies have fallen dramatically, and rents have skyrocketed.

“We are in the midst of the worst rental affordability crisis that this country has known,” said Shaun Donovan, U.S. Secretary of Housing and Urban Development.

Half of all U.S. renters today pay more than 30 percent of their incomes on rent. That’s up from 18 percent a decade ago, according to the Harvard center. For those in the lowest income brackets, the jump is even worse.

“Over four years, a 43 percent increase in the number of Americans with worst-case housing needs,” said Donovan. “Let’s be clear what that means, they’re paying more than half of every dollar they earn for housing.”

The numbers are not lost on Annie Eccles, who is in her late 20s. She has been renting for over two years, and the rent on her Bethesda, Md., apartment has increased by the maximum the county allows every year.

“It’s frustrating because we pay for rent, we also pay for parking, and just knowing that every June it’s going to increase significantly, it’s frustrating,” said Eccles.

And Eccles pays almost as much each month on student loan debt as she does in rent. Put together, it makes it very hard for her and her husband to save up enough to buy a home of their own.

“It would be hard buying in this area, just because it’s so expensive,” she added.

Most younger Americans, like Eccles, want to be homeowners someday. While so-called millennials favor mobility and city living, they still see homeownership as a goal.

“Nineteen out of 20 people that are surveyed say that they intend to buy a home at some point in the future, if they’re under the age of 30,” said Eric Belsky, director of Harvard’s Joint Center for Housing Studies. “There is no question that the will toward homeownership remains there, it’s the way.”

Home prices are rising faster than expected, due to heavy investor demand, ironically in single-family rental housing. While more than 3 million owner-occupied homes are now investor-owned rentals, there is still a lack of supply in the market. New rental stock is coming soon, but demand is not easing. Renters may want to be buyers, but many still can’t, due to rising home prices and mortgage rates.

“You add in other things, like higher student debt for many people, you add in the fact that incomes for low- and moderate-income people have not been going up as fast as inflation, and you have a situation where it’s going to be very difficult to buy homes,” said Belsky.