The fourth quarter is notoriously slow for home sales. But while winter weather, end-of-year work deadlines, and the holidays slow most buyers and sellers, the market conditions are just right for real estate investors, according to new research from data analytics firm HouseCanary.
HouseCanary studied the nation’s 50 largest metropolitan statistical areas (MSAs) to rank the best and worst fourth-quarter markets for real estate investors. They found a correlation between weather and rental market conditions, pointing out the markets that heat up in the winter, even when temperatures don’t.
Rental investment opportunities are high in markets where a fourth-quarter dip in sales prices coincides with high Effective Gross Yield (EGY) -- a measurement of rental yield that factors in local property taxes, home prices, and rent costs for the area. Fewer opportunities are present in markets with year-round buying seasons, HouseCanary explains, and where EGY is either steady or declining.
Cleveland, OH ranked first in investor opportunity, followed by Detroit, Mich. and Columbus, OH. More broadly, HouseCanary found that the biggest “seasonal slowdowns” are clustered in Michigan, Minnesota, Ohio, Pennsylvania, and Connecticut, states in which low temperatures, snow, and ice can deter buyers and sellers.
In contrast, San Jose, San Diego, and Los Angeles, Calif. Ranked as the three worst markets for rental investment opportunity due to their more temperate climates and year-round buying season. “Weather plays a very strong factor in the seasonal dip,” said Alex Villacorta, executive vice president of analytics at HouseCanary. “You can clearly see a band of activity from central California down through southern Nevada, Arizona, Texas, all the way through Florida.”