DS News

116 ILLINOIS Illinois Leads 10 Best SFR Investment Markets Which housing markets are the hottest amongst single-family rental investors? Online real estate investment and management firm HomeUnion pored over two years of sales data to answer that very question, compiling a list of the top 10 most sought-after housing markets of 2017. Topping the charts: Chicago, Illinois. In HomeUnion's report, Steve Hovland, Di- rector of Research for HomeUnion, explained, "To remain ahead of the market and meet inves- tor demand, we analyzed investor migration patterns and preferences since the beginning of 2016." e result is a list that reveals a single- family rental investment boom occurring in the Midwest, with cities like Columbus, Detroit, Cincinnati, and Philadelphia all making the top 10 as well. Hovland continued, "Rental properties in these metros are trading at a faster rate than before as their local economies continue to grow, the cost of living is lower than it is in most coastal metros, and median local incomes are keeping pace with home values." Here is HomeUnion's full list of the top 10 most sought-after real estate investment mar- kets. Each entry also includes the percentage increase in investment home sales between 2016 and 2017 for that metro defined as "single-family homes that transacted above $30,000 and with absentee tax records." » Chicago, Illinois: 30.4 percent » Columbus, Ohio: 18.1 percent » Atlanta, Georgia: 6.9 percent » Detroit, Michigan: 2.6 percent » New York, New York: 2.5 percent » Cincinnati, Ohio: 2.1 percent » Philadelphia, Pennsylvania: 1.6 percent » Orange County, California: 1.5 percent » Indianapolis, Indiana: 1.3 percent » Milwaukee, Michigan: 1.0 percent On the other end of the spectrum, a trio of Florida metros landed at the bottom of HomeUnion's list. Hovland explained, "Higher prices are pushing some vacation homebuy- ers to the sidelines in many popular Florida markets. Investors are also becoming more selective when choosing assets in these booming Florida markets." Here are the 10 least sought-after rental markets, along with their 2016-2017 decrease in investment home sales: » Tampa, Florida: -6.4 percent » Jacksonville, Florida: -6.0 percent » Fort Lauderdale, Florida: -4.5 percent » Baltimore, Maryland: -4.1 percent » Miami, Florida: -4.1 percent » Washington, D.C.: -3.9 percent » Boston, Massachusetts: -3.2 percent » Buffalo, New York: -2.7 percent » Orlando, Florida: -2.7 percent » Salt Lake City, Utah: -1.9 percent With the rents rising and lease retention rates on single-borrower, single-family rental securitizations climbing to 76.3 percent in Sep- tember 2017, the rental market looks to have a lot of potential in 2018. Assuming, that is, that you know where to invest. MICHIGAN Detroit Is the Most Affordable U.S. Market Detroit, Michigan, takes the distinction of being the most affordable market in North America, according to a study by Point2 Homes. Point2 Homes examined the 50 largest markets in North America and created an "af- fordability ratio" by dividing median home sale price by the yearly median income for that area. Put simply, Point2 Homes' affordability ratio estimates how long it would take to pay off a median home in each of the markets, if a home- buyer were somehow able to put their entire annual income toward paying off that total. e median home price in the Motor City is $48,000. Unfortunately, the median family income is only $25,980. With those numbers, a family putting all their income toward paying off a median home in Detroit could do so in less than two years. In both Manhattan and San Francisco—the second- and third-most unaffordable markets in North America, respectively, according to the report—the median home selling prices are both in the neighborhood of $1.2 million. How- ever, the median family income for each city is different. In Manhattan, it's $77,559, meaning it would take approximately 15.6 years to pay off a median home. In San Francisco, the median income is significantly higher at $92,094, mean- ing a median home could be paid off in 13.8 years. Given that pretty much no one is capable of funneling their entire annual income solely toward housing, this should give you an idea of just how unaffordable these cities actually are. Brooklyn, New York; Los Angeles; Boston; San Jose, California; Seattle; and San Diego round out the rest of the top 10 most unafford- able North American cities. ere are many contributors to afford- ability, not the least of which is availability. In the decade following the economic crisis of 2007-08, the number of potential homebuyers grew but inventories shrank, adversely affecting first-time buyers. As demand exceeded supply, the advantage belonged to sellers. In Manhattan, first-time buyers have been affected by persistently low inventory, and prices have also been driven up more than 30 percent by rising development costs and a trend toward more luxury buildings. e situation in San Francisco is a little different. e median in- come there is the nation's highest, so the market may not be as susceptible if the mortgage de- duction is cut, but there remains concern about the impact of the federal tax-reduction plan, and inventories there also have remained low. OHIO Homeowner Perceptions in Sync with Appraisers—But Not in Cleveland Homeowners' and appraisers' perspectives of home values are almost in sync, according to Quicken Loans' National Home Price Percep- tion Index (HPPI). However homeowners on average have a higher opinion of their home values than appraisers do. For example, in Cleveland, Ohio, the aver- age appraised value is 2.35 percent lower than an- ticipated by a homeowner. On the other hand, homeowners in Dallas, Texas, are typically undervaluing their homes' worth. According to the data, the average appraisal value in Dallas is 3.25 percent higher than what the homeowner predicted. Although the HPPI reports the average appraised values are merely 0.67 percent lower than the average owners' estimates in Novem- ber, this represents the narrowest gap in 2017. In addition, November is also the 6th consecutive month the margin between the two values has narrowed. According to Bill Banfield, Quicken Loans EVP of Capital Markets, it's encouraging to see the opinions from homeowners and appraisers more aligned on a national level. "Appraisals are one of the most important data points when applying for a mortgage," Banfield said. "If an appraisal is lower than expected when refinancing, the homeowner will need to bring more funds to closing, or might even need the mortgage to be restructured. e more homeowners and appraisers agree, the

• Cover