If you ask ten different experienced real estate investors what “fast growing” means, the odds are that you’ll get ten different answers.
Of course, common financial metrics used to measure how profitable a real estate investment could be include cash flow, yield, and property appreciation. Generally speaking, markets with strong job growth, increasing populations, and rising rents tend to make for markets that attract rental property investors.
However, the fact is that even professional real estate investors interpret data in different ways. In this article we’ll look at how four leading real estate organizations rank the fastest growing markets in the U.S.
While there’s some agreement on the best markets for investors, there are also some places to invest that may come as a potentially profitable surprise.
1. Urban Land Institute’s list
The Urban Land Institute (ULI) is the oldest and largest network of cross-disciplinary real estate and land use experts in the world. With 40,000 global members, the organization’s professionals are actively involved in issues such as housing and communities, real estate finance and investment, innovation in development practice, and shaping successful cities and regions.
For 41 consecutive years, the ULI, in conjunction with financial professional services firm PwC (PricewaterhouseCoopers) has been publishing the Emerging Trends in Real Estate report. Using criteria such as population size and growth, development opportunities, investment capital inflow, and transaction volume, the ULI ranks these 20 U.S. markets as having the best overall real estate prospects in 2022:
- Tampa/St. Petersburg
- Dallas/Fort Worth
- Salt Lake City
- San Diego
- Washington, DC-Northern VA
- Orange County
- Inland Empire
- Los Angeles
Markets rated in the top ten have a strong representation from mid-sized markets – such as Austin, Charlotte, and Nashville – and have also consistently attracted investment capital.
According to ULI, single-family housing trends through 2030 will be forged in a “simmering cauldron of demand for shelter, constrained by an inadequate supply of new development and construction.” In fact, single-family rentals are expected to become a core magnet of housing preference, and could permanently alter the goal of owning a home.
2. Realtor.com’s list
Realtor.com is owned by Move.com, whose parent company is the publicly held mass media and publishing company News Corp, owner of assets such as Dow Jones & Company, publisher of The Wall Street Journal. The company has a long-standing partnership with the National Association of Realtors (NAR), the largest trade association in the real estate industry.
The Top Housing Markets for 2022 forecast by Realtor.com uses criteria such as supply and demand, home sales, and affordability to rank each major real estate market in the U.S. Macro economic factors used in the housing forecast include GDP, monetary policy and the Federal Reserve’s effect on mortgage interest rates, employment, consumer confidence, and the general economic outlook for the U.S.
According to Realtor.com, the top ten housing markets positioned for growth in 2022 are:
|Market||Sales Volume||Price Change|
|1. Salt Lake City, UT||15.2%||8.5%|
|2. Boise, ID||12.9%||7.9%|
|3. Spokane, WA||12.8%||7.7%|
|4. Indianapolis-Carmel, IN||13.7%||6.3%|
|5. Columbus, OH||8.9%||9.7%|
|6. Providence-Warwick, RI-MA||8.1%||9.5%|
|7. Greenville-Anderson, SC||11.4%||5.7%|
|8. Seattle-Tacoma-Bellevue, WA||9.6%||7.5%|
|9. Worcester, MA-CT||8.4%||8.2%|
|10. Tampa-St.Petersburg, FL||9.6%||6.8%|
The report predicts that these top ten real estate markets are primed for growth in 2022. Some of the factors these top housing markets have in common are:
- Strong housing momentum from 2021 sets up positive performance for 2022.
- Buyers have more options due to fewer supply constraints.
- Current low housing prices put the markets on the radar screen of both buyers and sellers.
- Lower cost of housing in each market creates a low barrier to entry.
- Economies of these smaller secondary markets should keep growing even if the U.S. as a whole slows down.
- Growth of well-paying jobs spurs population growth and attracts buyers.
3. Policygenius’s list
Policygenius is an online insurance marketplace where investors can compare coverage options for landlord insurance from top insurance companies and buy policies entirely online. Founded back in 2014, the company has sold more than $140 billion in coverage.
Using data from Zillow and the U.S. Census Bureau, the company looked at statistics such as home values and appreciation, effective property tax rate, rent to home value ratio, and rent to income ratio. After crunching the numbers in more than 600 cities, Policygenius found the 25 best places for real estate investing in 2022.
Here are the top 5 real estate markets to invest in this year, with additional demographic data from Census Reporter and Data USA. Home value appreciation is the increase in home value in the last 5 years, from August 2016 to August 2021, according to Zillow.1. Youngstown, Ohio
Although Youngstown has a small metro population of about 65,000, the city is part of a larger metro area of 540,000 residents that includes Warren and Boardman, and is just a one hour drive from Cleveland and Pittsburgh. The city’s low home prices, low vacancy rate, and effective property tax rate of 1.54% offer an investor the opportunity to purchase and own rental property at a very affordable price.
Typical value of a home in Youngstown is $42,867 and values have appreciated by 77% over the past 5 years. Despite the low home prices in Youngstown, 46% of the housing units are occupied by renters, with single-family homes making up 78% of the total housing units.
With a rental vacancy rate of 3.20%, the rent to home value ratio is 18.53%, and the rent to income ratio is 28.50%. Median household incomes have grown by 8.6% year-over-year to $29,143.2. Detroit, Michigan
Nicknamed the “Motor City,” Detroit is home to just over 670,000 people in the city and about 4.4 million residents in the metropolitan area. While the Big Three auto companies are still major employers, over the years Detroit’s economy has become more diversified. Today, the city is home to high-tech and financial services companies including Apple, Ally Financial, DTE Energy, and Quicken Loans.
Although home values in Detroit have appreciated by 103% over the past 5 years, the median value of a typical home is still only $58,213. Low home prices and a vacancy rate of 5.10% provide an investor with a rent to home value ratio of 16.99% and a tenant rent to income ratio of 3.70%.
The demographics of Detroit also help to make the market attractive for rental property investment. About 52% of the housing units in Detroit are occupied by renters, and single-family homes make up 73% of the housing inventory. Median age is 35 years, median household incomes are $33,965 and have grown by 8.6% over the past year, and the effective property tax rate is 2.90%.3. Spring Hill, Florida
Located just 40 miles from Tampa, Spring Hill is part of the Tampa-St. Petersburg-Clearwater metro area and is home to just under 114,000 residents attracted to the town’s low cost of living and great quality of life.
Median home values in Spring Hill are $243,145 and have increased by 85% over the past 5 years. About 87% of the town’s 45,839 housing units are single-family homes, and 20% of the homes here are occupied by renters. With a rental vacancy rate of just 3.10%, good property to rent can be hard to find. Investors realize a rent to income ratio of 30.50% and a rent to home value ratio of 5.28%.
Over the past year, the population of Spring Hill has increased by 3.0%, the job market has grown by 5.0%, and property values have risen by 11.0%. Florida is known as a low-tax state, and in Spring Hill the effective property tax rate is just 0.82%.4. Pueblo, Colorado
With just over 112,000 residents, Pueblo is the 9th largest city in Colorado and one of the largest steel-manufacturing towns in the country. The city hosts the annual Colorado State Fair, is home to a bustling arts scene, and the year-around Riverwalk along the Arkansas River.
Median home values in Pueblo are $263,343 and have appreciated 80% over the last 5 years. Renters occupy 40% of the 48,427 housing units in the town, and single-family homes account for 75% of the housing units in town. The vacancy rate is down to 3.10%, rent to income ratio is 21.70%, the rent to home value ratio is 3.64%, and effective property taxes are 0.63%.
Over the past year, employment in Pueblo has increased by 2.1%, the population has grown by 0.78%, and median household incomes increased by 5.51% to $40,450 while property values have risen by 8.46% to $141,000.
5. Birmingham, Alabama
Home to just over 210,000 residents, Birmingham is the 2nd most populous city in Alabama and is part of the largest metropolitan area in the state. Although the city began as a manufacturing center for steel, over the years the economy has become much more diverse. While steel still plays a significant role in the job market, today Birmingham is also a leading banking, financial services, bio-technology, and healthcare center of the South.
Median home values in Birmingham are $90,047 and have increased by 69% over the past 5 years. Of the 113,421 housing units in the city, 60% are occupied by renters and 58% are single-family homes. The rental vacancy rate is 9.40%, rent to income ratio is 11.10%, and rent to home value is 11.15%, with an effective property tax rate of 0.80%.
Over the past year, the job market in Birmingham has grown by 1.84%, helping to drive median household incomes to $37,375 for a year-over-year gain of 5.74%. The population in Birmingham has grown by 0.13% year-over-year.
4. Motley Fool’s list
The Motley Fool company was created with the goal of making you smarter, happier, and richer through real estate investing. On December 3, 2021, the company published “10 Best Cities to Invest in Rental Properties in 2022.”
As 2022 begins, experienced real estate investors know that it’s never too late to find deals in the best rental property markets. As Motley Fool notes, over the last few years the high cost of living has pushed residents and business into midsize metro areas and smaller secondary markets where job opportunities are greater and the standard of living is better.
When creating their list, the company analyzed various data points including population growth, employment change, market rents, and price-to-rent ratio. Here are the top metro markets for rental property investors in 2022, listed in alphabetical order:
- Austin, Texas
- Birmingham, Alabama
- Boise, Idaho
- Chicago, Illinois
- Detroit, Michigan
- Durham, North Carolina
- Independence, Missouri
- Jacksonville, Florida
- Los Angeles, California
- Youngstown, Ohio
Investors should note that markets with strong population growth aren’t necessarily the best for rental property investment.
For example, fast-growing metro areas such as Myrtle Beach, SC, with 2.9% growth, and Lakeland, FL, with a 1.6% population growth rate, both have low price-to-rent ratios. By contrast, some of the best markets for renter demand have price-to-rent ratios of 20.0 or higher.
How can you find rental property in your favorite real estate market?
The Roofstock marketplace has many rental properties listed for sale in the markets mentioned throughout this article. Start browsing properties here.