The Most Profitable Housing Markets in The US

San Francisco

Ok, by now we’ve witnessed the strange fluctuations in the United States markets, which have consequently taken real estate investors on a roller coaster ride through the past couple of decades. In the last 40 years alone, markets experienced overheated home prices in some of the country’s primary metropolitan zones, which ultimately suffered a big blow in the post-recession era, forcing a majority of the investors to begin adjusting and adapting to the progressively changing real estate markets.

Although the market has since picked up, nothing is guaranteed. You could invest millions of dollars today, only to watch them grow in a snail’s pace thanks to various unfavorable volatile factors. On the other hand however, you could still put in a couple of thousand bucks in the right markets and smile all the way to the bank, as you watch your money grow into millions.

Going by recent predictions by industry experts and invest managers, real estate in the US is undoubtedly a safe bet for both sale and rental properties. According to Lawrence Yun, the National Association of Realtors chief economist, existing home sales will experience a rebound in the next couple of years. He revealed this during the 2014 Realtors Conference and Expo, where he also predicted a 4% rise in the national median existing home price.

To benefit from this growth, the key is investing in cities currently experiencing a phenomenal job growth, consequently attracting a large number of prospective buyers and tenants. Going by MarketWatch Catey Hill’s observations, this strategy alone could see you reap an ROI of 49% or more, depending on where you actually place your money.

So, which are the most profitable housing markets in the US?

San Mateo County, California

San MateoSan Mateo County in California leads the pack of metropolitan areas that could potentially multiply your cash as a real estate investor. According to a research study conducted by RealtyTrac, a reputable real estate analytics firm, homeowners in the area have posted the highest profit margins across all urban areas in the United States, after selling their properties at an average rate of 65% more compared to their previous buying prices. On average, each has raked in about $388,000 in profits.

According to Daren Blomquist, RealtyTrac’s vice president, San Mateo’s lucky charm has been the headquarters of Oracle, Facebook and Google’s parent company Alphabet, all of which are located just a couple of minutes away. Consequently, their employees, who are in fact paid handsomely, have been settling within the larger San Mateo area, acquiring premises that have substantially appreciated. Although some have rented properties, the most prevalent preference is buying, with the professionals focusing mostly on residential properties.

This however, doesn’t limit the potential of commercial properties. As a matter of fact, it boosts the ROI potential of the corresponding commercial properties that will progressively serve the increasing needs of the steadily growing suburbs.

Alameda County, California

California’s 7th most populous county, Alameda, has seen its home owners make returns that closely rival San Mateo’s profits. The county, which falls on the east of San Francisco Bay, has experienced an average appreciation rate of 64%, with property owners making an average of $246,000 over the past one year.

To most sellers, this is indeed a commendable trend, considering the profits that are exceedingly astronomical, especially when they’re compared to the standard national average of 11%.

Santa Clara County, California

Santa Clara closes the chapter for state of California, which has impressively taken the top three spots. Just like Alameda, the Bay Area of Santa Clara County closely rivals the preceding area, with property owners making a killing by selling at an average appreciation rate of 63%. Since property here is priced higher than Alameda, their profits translate to more cash, with each seller walking away with about $315,000.

Going by research conducted by CoreLogic, these rates are expected to keep rising in the next one year, possibly at a steadier rate compared to the national annual appreciation rate of 6.3%, which was predominant in most of the other states over the past one year.

Middlesex County, New Jersey

The population of professionals in New York City has constantly been rising at a steady rate, consequently adding pressure to existing facilities, including housing. A bulk of the professionals, mostly millennials who’ve just began working in the area, have resorted to seeking accommodation in the larger metropolitan area, including Middlesex County- which is conveniently positioned along the Philadelphia to New York trail line.

The result has been individuals and corporations selling houses at 52% more compared to their previous buying prices. Compared to the three preceding areas, this county has the cheapest houses, with property owners making an average of $92,500 after sale.

Although a bulk of the sellers have been real estate investors, home owners have increasingly capitalized on this wave by cashing out before the rate possibly stagnates or begins going down. As a result, a fraction of the 58% of these homeowners who have owned properties in the county for more than 10 years, have been relocating to other areas- consequently bringing down the ownership rate, which has held up against the national average of 48% for a couple of years now.

Multnomah County, Oregon

Multnomah has greatly benefitted from millennials and young professionals avoiding the high priced neighborhoods of Seattle and San Francisco. The county, which takes up a significant portion of Oregon, offers them pretty much the same amenities and privileges as most of the middle-upper neighborhoods. This alone has seen prices go up, with property owners selling at 49% higher than the original buying prices, translating to about $97,000.

As you’ve noticed already, the rates on these 5 areas are spread over a couple of years. As an investor, you could either go with these or focus on annual rates, which could be a better bet, especially when it comes to short term investments.

To identify the top areas for short term investments, experts at BiggerPockets.com recently developed a complex algorithm that analyzes all the major real estate markets, in a bid to determine the best and worst areas to place your money over a short period of time. Ultimately, they came up what is largely known as The BiggerPockets Real Estate Investment Index, which caters for both appreciation and gross rents as a percentage of average buying prices. The subsequent ranking places the following locations above the rest:

Dallas

Dallas holds the top position, with properties experiencing the highest appreciation rates and considerably good rent value compared to average property values. In one year alone, investors have enjoyed unleveraged profits of 19.54% on residential properties, before factoring in related expenses. Currently, the average rent is about $12,500, with the rent to value standing at 8.69%

Denver

With home prices increasing at an annual rate of 18.9%, Denver takes the second spot after Dallas. Properties in the Mile High City are rented at an average rate of $14,100, with a rent to value ratio of 5.51%.

Miami

Despite having an average rent rate of $15,700, which is considerably higher than Denver and Dallas, the beachside city of Miami comes in third with an annual return that currently stands at 18.57%. The rent to value ratio of the properties within the city is at a strong 8.14%.
• Houston

With a rate that’s just 0.05% lower than Miami’s, Houston comes in at number four with a yearly return rate of 18.52%. Coincidentally, the rent to value ratio is slightly higher than Miami’s, at 8.39% with a corresponding average rent of $12,000.

Atlanta

The Big Peach closes the top 5 list with properties experiencing an annual appreciation rate of 16.45%. Its rent to property value is also higher than Miami’s but falls slightly behind Houston’s at 8.36%. Investors who choose to rent out property in the area are enjoying average rent returns of $11,900, just a $100 behind Houston.

Final Thoughts

Understandably, real estate has been perceived differently by various individuals. Despite historically being known as one of the fastest and most effectual systems of building wealth, it still scares a significant number of individuals with risky investment habits. We all know that one person who made losses last year alone, despite these figures that prove an otherwise successful year for most investors. While some investors were busy strategically placing their bets in the most promising areas, others invested haphazardly- and contrastingly made losses.

With these pointers, you should now count yourself among the former group of investors, and you can now safely place your money where it’s bound to grow.

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