2019 ROI First Quarter Edition 2019 - HIS Capital Group | Page 52
“Last year, at this time, investors were seeing returns drop
in three-quarters of the counties that were analyzed. So far
this year, those margins are up in six out of every 10 counties
analyzed. But despite the generally rosier picture, profits
vary widely and investing in the single-family home rental
market is not always a great move. The typical bottom-line
gain from county to county this year has ranged from as
high as 29 percent to as little as 3 percent.”
Counties in Baltimore, Macon, Vineland, Rockford,
Detroit post highest rental returns
Counties with the highest potential annual gross rental yields
for 2019 were Baltimore City, Maryland (24.5 percent); Bibb
County, Georgia in the Macon metro area (21.9 percent);
Cumberland, New Jersey, in the Vineland-Bridgeton metro
area (21.2 percent); Winnebago, Illinois, in the Rockford
metro area (17.1 percent); and Wayne County, Michigan in
the Detroit metro area (17.1 percent).
Along with Wayne County, Michigan, the highest potential
annual gross rental yields among counties with a population
of at least 1 million were Cuyahoga County (Cleveland), Ohio
(12.0 percent); Allegheny County, Pennsylvania (10.9 percent);
Cook County (Chicago), Illinois (9.7 percent); and Philadelphia
County, Pennsylvania (9.4 percent). Not surprisingly counties
in San Francisco, San Jose and New York post lowest rental
returns.
Rents rising faster than wages in 55 percent of
markets
• The 98 SFR Growth markets included Wayne County
(Detroit), Michigan; Cuyahoga County (Cleveland), Ohio;
Allegheny County (Pittsburgh), Pennsylvania; Milwaukee
County, Wisconsin and Marion County (Indianapolis),
Indiana.
Huge shifts are occurring in the rental market:
Return to basics. Rental demand is shifting to a focus
on affordability, with renters willing to sacrifice square
footage, privacy, amenities, and commute time in return
for lower rent.
Suburban growth. Urban renters are moving, children in
tow, to the suburbs to either purchase a home or rent in a
good school district.
Entrepreneurial capital. Capital is flooding into a brand-
new asset class: newly built rental homes (build for rent,
or BFR) with a variety of new designs appealing to a range
of rental segments that have gone unserved.
Trends now see the focus on suburban more than urban
development this year. They also noted that designs and
amenities need to change quickly:
Urban: Lower the rents through fewer amenities and less
private space, as today’s young renter is more likely to take
on a roommate to save rent and less willing to pay a premium
for great amenities.
Rents rose faster than wages in 236 of the 432 counties
analyzed (55 percent), including Los Angeles County,
California; Harris County (Houston), Texas; Maricopa County
(Phoenix), Arizona; San Diego County, California; and Orange
County, California. Suburban: Shift back toward more affordable, family-
oriented, value-oriented apartments that have plenty of
square footage and new homes designed with renters
in mind.
Wages rose faster than rents in 196 of the 432 counties
analyzed (45 percent), including Cook County (Chicago),
Illinois; Kings County, New York; Queens County, New York;
Clark County (Las Vegas), Nevada; and Tarrant County (Dallas-
Fort Worth), Texas. Home price appreciation outpacing wage growth in 49
percent of markets
Best SFR growth markets in Cleveland, Columbia,
Pittsburgh, Rockford, Atlanta
• The report identified 98 “SFR Growth” counties where
average wages grew over the past year and with potential
2019 annual gross rental yields of 10 percent or higher.
HOME AFFORDABILITY
Median-Priced Homes Not Affordable for Average Wage
Earners in 71 Percent of U.S. Housing Markets The 335
counties where a median-priced home in the first quarter
was not affordable for average wage earners included Los
Angeles County, California; Maricopa County (Phoenix),
Arizona; San Diego County, California; Orange County,
California; and Miami-Dade County, Florida.
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