Rachel Burris10-minute read
UPDATED: May 31, 2023
With the pandemic significantly lowering mortgage rates and boosting buyer demand, inventory has been severely low across the country and prices have soared in response. Given how hot the market is right now, many Americans find themselves wishing they had invested more in real estate. But is now the right time?
Although purchasing at the peak of the market is always a questionable investment decision, it’s important to note that the housing shortage has had a ripple effect on the rental market. An increasing number of would-be home buyers have been priced out of the market. Unable to score affordable homes, these buyers have had to put their dreams of homeownership on hold and resort to renting until the market cools down.
As a result, available rentals are becoming harder to come by, which is allowing landlords to charge increasingly higher rents. Since demand within the rental market is likely to rise over the next year, now may be a great time to purchase a single-family home if you can afford it. However, to ensure your investment is profitable, you must carefully consider where to purchase your property. The location you choose will have a tremendous impact on your return on investment.
Finding the best location requires a lot of research, but Rocket Homes® has partnered with BestPlaces.net to help you identify places around the country where you’re most likely to see a favorable return. So, before you start scrolling through available listings, take a look at the 15 best places to invest in real estate.
The researchers at BestPlaces.net used the following metrics to determine the rankings for the best places to invest in real estate in the U.S.:
Home prices in Fayetteville are 10.2% below the U.S. metro average of $253,081, but home values have appreciated 14.8% since last year. The city has experienced tremendous growth in recent years. The population has increased by 14.1% over the last 5 years and job growth has risen by 15.4% in the same period, putting Fayetteville in the top 5% of the country for both metrics. The fact that job growth is keeping up with the population suggests that demand may continue to cause home prices to rise.
At 4.1%, the gross rental yield for Boise City is quite low, but homes in the area have appreciated at a rate of 29.1% over the last year and 97.4% over the last 5 years. The city’s home prices are in the top 10% of the country, and rental prices just haven’t caught up to them yet. Although investment properties in Boise may not be generating all that much rental income right now, the area’s rapid appreciation rate, which ranks in the top 1% of the country, is likely to make the purchase worthwhile, especially if you can use an Idaho home buyer assistance program to offset the costs of purchasing.
The Idaho housing market has undergone massive growth in the past few years. Like in Boise, home values in Twin Falls have experienced a substantial amount of appreciation. Home prices have increased by 18.7% in just 1 year, but the median price for a home in the area is only 2.1% above the U.S. metro average. The city’s rental vacancy rate ranks in the top 10% of the country. So, investors are not only able to score affordable investment properties in Twin Falls, they’re also readily able to find tenants to occupy them.
Green Bay ranks in the top 50% percent of the country for nearly every metric. It’s a city that has been experiencing steady growth, and its housing supply is now struggling to keep up with the demand. A Green Bay Housing Market Study estimates that 16,095 households will move to the area by 2040. Given this increase and city’s low rental vacancy rate, the region will need to add 3,314 to 7,441 new rental units to the market by 2040, making the city ripe for investment opportunity.
Springfield, Missouri is experiencing a real shortage in its housing supply, and not just because of strong buyer demand. New construction had all but ceased as a result of the Great Recession, which has further constricted the city’s inventory. However, with Springfield’s unemployment rate at 3.6%, which is lower than 90% of the country, and job growth in the top 15% of the country, building has started up again. Now, finding available land is an increasing struggle. But home prices in the area are still quite affordable.
St. George has become one of the best places to retire thanks to the beauty of its natural surroundings and the presence of its numerous national parks, museums and golf courses. The city’s population has increased by 3.9% in the last year and 19.4% in the last 5 years. Homes in the area have appreciated by 15.9% in 1 year, and given the fact that the city is in the top 1% of the country for population growth, it seems likely that this rise in values will continue.
Cincinnati is one of the best cities to live in Ohio, but home prices have been rising, making it also a great city to invest in real estate. The rate of appreciation over the last year was 13.8%, which is higher than 85% of the country. As a result, a growing number of Cincinnatians have been priced out of the market. Unable to find affordable housing, prospective home buyers have instead been forced to rent. Now, rents have skyrocketed, and the market has become severely undersupplied. According to The Enquirer, 62% of Cincinnati households currently rent their home, which makes the city a strong choice for real estate investment.
The housing market in Waco has been hot, as the city has been attracting more buyers from out of town. Believe it or not, much of the renewed interest in Waco was sparked by Chip and Joanna Gaines. Their HGTV show “Fixer Upper” has helped to rebrand the small city and breathe new life into its amenities. While home prices have increased by 51.3% in the last 5 years, the median home price in Waco is still 27.1% below the U.S. metro average, making properties seem all the more attractive to out-of-towners.
In Knoxville, first-time home buyers are struggling, as homes in the $100,000-$200,000 range are in the highest demand, and many can’t afford to increase their offers to beat out the competition. As buyers lose out on available homes, they must turn to rentals. But even the rental market is feeling the squeeze. Since landlords can get higher prices for their properties, they’re turning to sell, which is further constricting the supply of rental properties. Waitlists have become an unfortunate reality for renters, as have high rents, which have increased about 4.1% month-over-month.
Home prices in Provo-Orem may be in the top 10% of the country already, but there seem to be clear signs that indicate that housing prices are still on the rise. The population has been growing rapidly, as have job opportunities in the area. The metro area is in the top 5% of the country for population growth and the top 1% for job growth. With the metro’s unemployment rate currently at 2.5%, which is lower than 99.8% of the country, Provo-Orem’s economy has been thriving.
Median monthly rents in Sheboygan may be in the bottom 10% of the country, but home prices are also lower than nearly 70% of the rest of the United States. Yet, a high percent of the city’s rental properties are occupied - Sheboygan is in the top 4% of the country for its rental vacancy rate. According to an affordable housing market study conducted by MSA Professional Services, Inc., rental units make up 39% of Sheboygan’s housing stock, but the city will need to add 401-1,023 units by 2030 to meet the demand.
While home prices in Greenville are lower than 75% of the country, the city’s rental prices are about as high as 50% of the U.S. This disparity means that Greenville buyers can expect to get a healthy return on their investment. The gross rental yield for the area is 9.1% and ranks in the top 20% of the country. An increased number of buyers are taking note. In nearby coastal areas, houses are being snatched up particularly fast, as investors seek to capitalize on short-term rental opportunities.
In Springfield, Ohio, both rent and home prices are low, ranking in the bottom 10% and 20% of the country respectively. However, at 8.4%, the gross rental yield indicates a fairly high likelihood for profitability. Plus, the area’s vacancy rate is in the top 25% of the country, meaning that tenants are plentiful and rental properties are unlikely to remain vacant. With a lack of new construction entering the housing market, the inventory is low, so be prepared to compete for existing homes.
Rental and housing prices in Ogden-Clearfield are healthy, but at 4.2%, the gross rental yield is on the low side. While the area’s rent-to-purchase price ratio may be in the bottom 5% of the country, it may indicate that housing in the area is properly valued. Therefore, it’s likely that real estate investments in Ogden-Clearfield carry less of a risk. After all, the metropolitan area ranks in the top 2% of the country for both its job growth and unemployment rate.
Over the last five years, the population of Burlington has increased by 9.1%, which means that it has been growing faster than 90% of the country. Interest in Alamance County’s largest city stems from the fact that it enables residents to enjoy both an affordable lifestyle and a highly central location. Burlington’s cost of living is 21.7% below the national average. It’s also 24% cheaper than living in Raleigh. The city is just an hour away from North Carolina’s capital, providing those living in Burlington with the option of commuting.
To identify the places around the country where individuals are most likely to find the best real estate investment opportunities, BestPlaces.net began by analyzing 383 major metropolitan areas, which are home to over 85% of all U.S. residents.
The team collected and analyzed statistics in nine key measures that give insight into each area’s economy, home values and rental prices, population growth, vacancy rate and home price appreciation.
Each data metric was normalized and transformed to a common range of 0-100 points for the purposes of scoring and comparison. Weights were applied to each metric to reflect its level of importance in the study. The weighted scores for each metric were then summed and sorted to produce the final rankings.
All mentions of the U.S. metro average refer to the average of all 383 U.S. metro areas analyzed for the study.
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