DALLAS, Dec. 20, 2012 // PRNewswire // -- 2012 ends like it began, with Las Vegas still holding the top spot in the quarterly rankings of the best real estate markets for rental investment. Sin City's stability is surprising at first glance, given that eight of the markets that started 2012 in the "Top 10" are not on the list at the end of the year.
But a closer look at economic indicators explains why. Like Detroit--the only other market that placed consistently in the top 10 every quarter this year--unemployment has remained stubbornly high, currently at 11 percent for both markets.
"When you're looking for investment opportunity, you're looking for problems that still look bad," said Ingo Winzer , president and founder of Local Market Monitor. And that's why Las Vegas and Detroit stayed in the top 10.
Local Market Monitor and HomeVestors of America Inc., (known as the "We Buy Ugly Houses®" company) compile the quarterly list which ranks markets based on the future relative returns on homes purchased as rental properties.
"We encourage investors to look hard at the markets at the top of our Best Markets rankings," explained David Hicks , co-president of HomeVestors. "As home prices in those markets begin to rise though, opportunities for short term gains tend to diminish. There is a pent up demand in many of these markets. Potential home owners and investors are waiting until the market bottoms out, so when prices begin to rise, prices may increase faster than some would expect."
Winzer agrees. "When things start looking better, you won't get the same low prices. That's basically the reason our list of best opportunities has changed: things are looking less bleak in a lot of places and sellers are holding out for higher prices than they would have a year ago."
For example, of the eight that dropped out of the top ten, Atlanta was the biggest and dropped the furthest—from the ninth spot in the first quarter listing to 106 in the fourth.
Other major markets that dropped out of the top 10 included Orlando (from 3 to 16) and Phoenix (from 8 to 31). The smaller markets (under one million in population) that fell from the top ten were Daytona Beach (from 4 to 20); Bakersfield (CA) (from 5 to 11); Fort Myers (FL) (from 6 to 15); and Boise City (ID) (from 10 to 33).
"A year ago, home prices in Boise City had fallen 13 percent from the previous year - pretty bad," noted Winzer. "This year they're up seven percent. In Orlando, they had fallen 10 percent, this year they're flat. In Phoenix, prices had fallen 12 percent, but now they're up 10 percent. Initial prices aren't everything if you're a long-term investor. Short term gains are part of the opportunity as well," Winzer noted.
As with the first quarter ranking, markets in Nevada, California, Michigan and Florida dominate in the fourth quarter. They are: Stockton, (CA) at number two, Modesto, CA at number three, Detroit at number four, Vallejo (CA) at number five; Visalia (CA) at number six, Port St. Lucie (FL) at number seven, Warren at number eight, Reno at number nine and Flint at number ten.
Winzer said that the local economy makes a difference. "Fortunately for investors, the economy is still bad in those places." Unemployment is 13 percent in Stockton (CA), 14 percent in Modesto.
"In the short run it's tough to rent out houses in markets with high unemployment, but that's where the long term opportunities lie," he added, noting that in another couple of years, "most of today's best opportunities won't look as good - which means they won't look as bad."
Dallas-based HomeVestors of America Inc. is the largest buyer of houses in the U.S. HomeVestors trains and supports franchisees that specialize in buying and rehabbing residential properties. Most commonly known as the "We Buy Ugly Houses" company, HomeVestors strives to make a positive impact in each community. In 2010, for the fifth consecutive year, HomeVestors was among the prestigious Franchise Business Review's "Top 50 Franchises," a distinction awarded to franchisors with the highest level of franchisee satisfaction. For more information, visit www.HomeVestors.com.
Local Market Monitor, the premier real estate forecasting solution, offers investors in homes and home mortgages the local market risk intelligence they need to make informed decisions. Using a proprietary formula called the Equilibrium Home Price, Local Market Monitor determines if markets are currently over or under valued, equipping users with a long-term risk and investment perspective. Covering over 300 local markets, Local Market Monitor also presents key investors with a 12, 24 and 36-month home price forecast. The solution includes sorting capabilities allowing subscribers to view and compare real estate markets along various metrics, including Investment Suitability Ratings to identify opportunities based on individual investing goals. To learn more visit www.localmarketmonitor.com or call 800-881-8653.
SOURCE HomeVestors of America Inc.