The Best Housing Markets… for a Landlord

Whether they’re waiting out the housing market, or smack in the middle of the storm, an increasing number of Americans are choosing to rent, not own.

That’s good news for landlords and investors.

Foreclosures and risky lending have dogged the housing market. As mortgage lender and broker groups have tightened their standards, attractive home mortgages have grown harder to come by.

Yet rental fundamentals have remained strong, especially in the 10 areas that made Forbes‘ list of Best Markets for Landlords.

Tops on our list: New York City, where in the last 12 months rents have jumped between 7.4-7.9 percent across the Class A, B and C apartment classifications (”A” being the most luxurious, “C” being the least).

In the Big Apple, 80 percent of the population rents, and the city’s unaffordable housing entices few to make the leap to home mortgages.

Rounding out the top five are Seattle (where rental-property construction has been low since 2003), San Francisco, and Oakland and Orange County, Calif. Credit the giddiness of West Coast landlords to the general lack of affordable housing in those markets.

One curious finding of Forbes study: The best locales for landlords and investors aren’t necessarily the worst for renters. Take the Las Vegas housing market.

While vacancies there have jumped over the last year and rental rates have remained low, the city ranked seventh on our list due to its job growth: 4 percent year-over-year.

Sin City is the second best city in America for job growth, at nearly three times the national average, according to Mercer Human Resource Consulting.

The Also-Rans Foreclosures have a direct effect on the rental market, and the subprime debacle has certainly contributed its fair share.

In the first six months of 2007, the number of home mortgage foreclosures is up 58 percent vs. the same time period last year.

The homeless are flocking to landlords’ arms, as well.

In Cleveland, where Ohio mortgage loan foreclosures have surged of late, rents are tightening at some of the nation’s fastest rates.

Typically, rental markets tighten when the population and number of jobs increase - the direct opposite of what’s happening in some cities.

In the last year, Detroit’s rental vacancy rate has dropped to 5.4 percent from 6.9 percent, and Cleveland’s fell to 5.7 percent from 7.3 percent.

Landlords in Salt Lake City are grinning too.

Though it barely missed the top 10, Salt Lake City has asserted itself as a market in which rents jumped between 6.8 percent and 6.1 percent across the three rental classes and vacancy rates fell to 2.6 percent from 4.3 percent.

SOURCE: Forbes