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Cities Where Low Homeownership Rates Equal a Healthy Rental Market

Cities with low home ownership equal more renters

Location is an important factor for real estate investors, and the ideal one has a large pool of renters. With that in mind, some locations across the US are better than others. Researching the homeownership rates in various cities helps investors see what percentage of the population is looking for rentals. Therefore, landlords can narrow their efforts to locations where demand is high and the likelihood of a costly vacancy is low. So, join us below as we explore homeownership rates, what affects these rates, and the top cities with the most renters!

What is the Homeownership Rate?What is the Homeownership Rate?

The homeownership rate is the percentage of homes across the United States that are owner-occupied. Simply put, this is calculated by dividing the number of owner-occupied homes by the total number of occupied households. Based on information reported by the US Census Bureau, the most recent housing data for the fourth quarter of 2020 is the following –

National Homeownership Rate: 65.8%

Owner-Occupied Vacancy Rate: 1%

Rental Vacancy Rate: 6.5%

Top 10 US Cities with The Lowest Homeownership Rates

Many homeownership rates across the United States are on the rise, however, not everywhere. Low homeownership rates are a great sign for investors because this indicates a high volume of renters!

Top 10 US Cities with The Lowest Homeownership Rates

So, join us below as we look at the top US cities with the lowest homeownership rates based on the US Census Bureau 2020 Quarter 4 data.

  1. Los Angeles, CA
  2. New York, NY
  3. San Francisco, CA
  4. San Jose, CA
  5. Las Vegas. NV
  6. Milwaukee, WI
  7. Honolulu, HI
  8. Fresno, CA
  9. Richmond, VA
  10. San Diego, CA

Los Angeles, CA

The City of Angels is surprisingly a popular spot for rental property investment. While prices are high, Los Angeles offers a sublime climate, cultural diversity, and a stable job market. However, investors flocking to a city this large need to be mindful of neighborhoods as they are not all equal. Therefore, some of the best neighborhoods for rental return are Westwood, Silver Lake, and West LA!

Homeownership Rate: 48.3%

Median Home Price: $700,000

Average Rental Rate: $2,355 – but varies greatly depending on the neighborhood.

Homeownership Rate Trend: Down 0.2% from 2020 Quarter 3 Metrics

Included Metro Areas: Los Angeles, Long Beach, Anaheim

New York, NY

Many cities see the trend of individuals preferring to rent over buy, and New York is no exception. The high cost of living leaves homebuying out of reach for a large portion of the growing population. Therefore, NYC is one of the least risky rental investment locations, with an average vacancy rate of around half the national average. However, like any big city, some areas are better than others. The five boroughs in New York are Manhattan, Queens, Brooklyn, Staten Island, and the Bronx. Investors should check out listings in each while evaluating which best suits their investment goals and budget.

Homeownership Rate: 50.5%

Median Home Price: $835,000

Average Rental Rate: $2,990 – but varies greatly depending on the neighborhood.

Homeownership Rate Trend: Down 0.4% from 2020 Quarter 3 Metrics

Included Metro Areas: New York, Newark, Jersey City

Homeownership Rates

San Francisco, CA

San Francisco is small with a limited inventory and a pricey housing market forcing many residents to rent over buying. Thanks to these factors coupled with a strong economy, high median income, growing population, and low unemployment, The City by the Bay boasts one of the most resilient real estate markets in the US.

Homeownership Rate: 51.6%

Median Home Price: $1,299,000

Average Rental Rate: $3,998 – but varies greatly depending on the neighborhood.

Homeownership Rate Trend: Down 1.4% from 2020 Quarter 3 Metrics

Included Metro Areas: San Francisco, Oakland, Hayward

San Jose, CA

Nestled in Silicon Valley, San Jose’s home appreciation rate is higher than over 95% of other US cities. Most of the San Jose area comprises suburbs boasting great public schools, above-average income, and access to public transit. Additionally, nearby college campuses bring an influx of students in need of temporary housing, making San Jose a solid rental investment.

Homeownership Rate: 53.7%

Median Home Price: $1,130,679

Average Rental Rate: $2,450

Homeownership Rate Trend: Down 0.9% from 2020 Quarter 3 Metrics

Included Metro Areas: San Jose, Sunnyvale, Santa Clara

Las Vegas, NVLas Vegas, NV

The Entertainment Capital of the World is also one of the best places for investors looking to buy a rental property. The city enjoys a steady growth rate of around 3% and below-average tax rates. However, the pandemic left tourism almost non-existent, and jobs did suffer. That said, Las Vegas is bouncing back, and unemployment rates are steadily in decline. Life for the nearly 2 million metro area residents is slowly returning to normal, and the city will once again be ready to welcome the over 40 million annual visitors.

Homeownership Rate: 54.7%

Median Home Price: $300,000

Average Rental Rate: $1,155

Homeownership Rate Trend: Up 1.4% from 2020 Quarter 3 Metrics

Included Metro Areas: Las Vegas, Henderson, Paradise

Milwaukee, WI

For investors looking for a rental hotspot, look no further than Milwaukee! Offering a rental population at over 40% and growing, Milwaukee is recovering well from the pandemic. The city’s modernizing renovation efforts are drawing a younger generation to this Midwest metro hub. Additionally, Milwaukee’s lively tourist and festival culture paves the way for not just standard long-term rentals but vacation rentals as well. Plus, many properties are still considered affordable; just beware that prices are on the rise!

Homeownership Rate: 55.5%

Median Home Price: $146,000

Average Rental Rate: $1,200

Homeownership Rate Trend: Down 7.7% from 2020 Quarter 3 Metrics

Included Metro Areas: Milwaukee, Waukesha, West Allis

Honolulu, HIHonolulu, HI

The serene beach views of the Hawaiian Islands have some million-dollar views and the price tag to match. However, generating the rent to cover one of these luxury properties is tough since Hawaii boasts some of the nation’s highest-priced real estate. Investors here need to be selective, focusing on condos or small single-family homes in places like O’ahu, where rents can reach north of $3000/mo and price points are somewhat attainable.

Homeownership Rate: 55.6%

Median Home Price: $830,000

Average Rental Rate: $1,743 – but varies greatly depending on the neighborhood.

Homeownership Rate Trend: Up 1.7% from 2020 Quarter 3 Metrics

Included Metro Areas: Urban Honolulu

Fresno, CA

The eclectic mix of universities, art scene, and bright sunshine as well as economy makes Fresno a prime location for investors. Surprisingly, Fresno is still affordable by California standards and attracts young professionals escaping the Bay Area’s high costs. Booming healthcare and retail sectors combined with low unemployment rates point towards Fresno only continuing to grow in the future.

Homeownership Rate: 55.8%

Median Home Price: $283,500

Average Rental Rate: $1,194

Homeownership Rate Trend: Down 4.1% from 2020 Quarter 3 Metrics

Included Metro Areas: Fresno

Homeownership Rate Change

Richmond, VA

Like many other cities at the moment, Richmond is a seller’s market. It serves as the capital of Virginia and is also the state’s 3rd largest metro area. However, savvy investors can still find deals if they are prepared for the potential of multiple bids. Experts believe that Richmond may see an up to 5% growth rate in both sales and home prices.

Homeownership Rate: 56.3%

Median Home Price: $275,000

Average Rental Rate: $1,092

Homeownership Rate Trend: Down 9.7% from 2020 Quarter 3 Metrics

Included Metro Areas: Richmond

San Diego, CA

San Diego spreads across a wide area with a variety of eclectic neighborhoods. Locations such as Ridgeview-Webster, Emerald Hills, and the pricier Encanto are the best choices for investors. Prices here range from the upper $200s to close to a million or more, so there is a wide range of investor opportunities in any budget. According to recent market reports, condos and townhomes have become the most desirable rental class that offers the best return rate.

Homeownership Rate: 56.3%

Median Home Price: $650,000

Average Rental Rate: $2,580

Homeownership Rate Trend: Down 5.2% from 2020 Quarter 3 Metrics

Included Metro Areas: San Diego, Carlsbad

Factors Affecting Homeownership Rates

We discussed above how cities with low homeownership rates help signal a strong rental demand. However, what contributes to a higher or lower homeownership rate? Let’s review a few of these contributing factors below.

Factors Affecting Homeownership Rates

  • Low Inventory – If there are more buyers than available homes, this leaves some buyers without an option other than to rent until they can locate a home that suits their needs. According to the U.S. Census Bureau, around 60% of those that purchased their home before 2009 have not moved since. So, those looking to take advantage of low mortgage rates post-COVID are having a tough time.
  • High Prices – To go along with diminished inventory comes high prices. When a great listing does hit the market, it is likely snapped up quickly and with multiple offers. Therefore, this drives up prices and creates competition. Thus, rendering homeownership out of reach for many individuals. Nationwide the average price for a home is just over $250,000, but with the average annual income of a renter only $43,000, finding an affordable option is tough.
  • Location – Location plays a major role in all levels of real estate, including homeownership rates. States along the coastlines and with major metropolitan areas tend to have lower ownership rates. However, historically more affordable locations such as the Midwest have higher homeowner-to-renter ratios.

 

What Comes After Acquiring a Rental Property?

Once investors have purchased a rental property and are ready to rent, a whole laundry list of to-do items arises. So, is there an efficient way to handle rehab work, marketing, showings, screening applications, lease documents, routine maintenance, renewals, and emergency maintenance needs? Yes, and the answer is professional property management!

Bay Property Management Group knows the unique challenges that investors face. Therefore, taking daily operations off an already full plate is just one way we can help. Our team of dedicated leasing professionals, property managers, maintenance technicians, accounting staff, and an extensive vendor network can handle every aspect of your rental business for you by offering transparent and low monthly management fees. Give us a call today to find out how full-service rental management can help you attain your investment goals.