Single family dwellings as rentals are one of the surprising surviving trends from the real estate bubble implosion and ongoing recovery. In the past when markets slid, many homes did become rentals – but just for short periods of time until prices recovered and then were often sold to the people that rented them. That is not the case this cycle as an entire industry has grown to service investors of single-family properties.
When investors did buy distressed properties, they sought out heavily discounted foreclosure and short sales that provided impressive rental returns given low acquisition costs. As markets recover, there are fewer and fewer distressed properties available, limiting investor acquisitions. In February 2016, investors accounted for 18 percent of all existing home acquisitions and bought at an average 17 percent discount versus non-distressed properties (National Association of Realtors®). In comparison, foreclosures and short sales made up 28 percent of all transactions in April 2012 with foreclosures selling at an average 21 percent (NAR).
To identify where investors have the best opportunity to buy distressed properties, RealtyTrac analyzed cities with a population of 1 million or more and came up with the top-10 having the greatest price discounts on bank-owned homes. In these markets, bank-owned properties are selling for less than one-half the price of non-distressed properties.
So how are these markets performing economically speaking? The following table lists the latest 12-month job growth rates ending February 2016, net change in jobs and total number of jobs in the MSA. While the top three cities with greatest discounts are having subpar job growth rates – each less than one-third the level of the U.S. – five of these heavily price discounted markets have job growth rates outperforming the U.S.’s current 1.90 percent.
To read the entire article in the National Real Estate Investor click http://nreionline.com/single-family-housing/top-10-cities-foreclosure-discounts-single-family-homes#slide-0-field_images-1865351
For single family investors, there are remaining opportunities in some markets across the country. Just not everyplace.
Ted