Study: Which Property Type Has the Best Price Growth?
Part of the American dream is owning a home—and another part is establishing a business so you can be your own boss. Whether you're fixing and flipping or buying and holding, you'll want to understand price growth in any market where you're investing so that you've got a good idea of how your asset is appreciating (or not).
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HouseCanary examined the top 100 metropolitan statistical areas (MSAs) in the United States by population and looked at which ones had the highest year-over-year price growth for three property types: single-family homes, condos, and apartments. We found that all property types are seeing price increases in certain parts of the country, which also correlates with U.S. Census migration data.
Home is Where the Cash is
The single-family home (usually surrounded by a white picket fence) is the quintessential symbol of housing in America. It’s where you can raise your two-plus kids and give a dog space to run around the yard, and in some metro areas, single-family homes are a better investment than other types of property.
Most of the housing stock in the United States is represented by single-family homes. Generally speaking, home prices are growing faster in Florida and the West than they are in the Southeast and Northeast parts of the country.
Related: Study: The Impact of Tax Reform on Property Investors by County
Condo in the City
We see this pattern reflected in the best markets for condos, too. Condos are multifamily units that are available for individual sale and ownership. Unlike an apartment building, a condo building is managed by a homeowners' association (HOA) and allows for individual ownership of units, while an apartment building is owned and managed by an individual or company and does not allow individuals to purchase units, instead renting them out either short-term or long-term.
Note: One MSA in the top 100 by population (Buffalo, New York) was excluded from our condo research because there weren’t enough condo properties to draw a year-over-year price growth conclusion.
Price growth for condos is generally higher across the board than price growth for single-family homes—but not everywhere. So although condos might seem like a less risky, more lucrative investment than single-family homes, it really depends on where you’re looking.
The Data in Apartment 13
Unlike condos, apartments cannot be purchased by individual buyers; instead, they are owned by a company or individual and rented out unit by unit, either to long-term renters or short-term occupants (like vacation rentals). But like condos, price growth has been higher for apartments than for single-family homes—and also like condos, if you don't choose your investment market wisely, then you might end up buying an asset that decreases in price year-over-year instead of increases.
Condos and apartments tend to increase in price more than single-family homes in areas where the population is growing, but they’re not always a safe bet—condo and apartment prices can decline year-over-year in markets where population growth is slow or markets where more people are migrating out than are moving in.
Price growth is strongest in the West and in Florida, and less robust in the Southeast, while parts of the Northeast may require even more digging to find a good investment deal. Pay attention to where people are moving and try to secure investment properties in those markets if you’re hoping to make the most money from your real estate investment upon sale.
HouseCanary examined the top 100 MSAs in the United States by population for this research. We looked at year-over-year average price change at a block-group level (where distinct property type indices are available and maintained), then rolled all of the applicable blocks for each property type up to the MSA level, creating a weighted average of all block groups and their price changes to determine the year-over-year price change for single-family homes, condos, and apartments in the MSA.
Does this data surprise you? Why or why not?