With the housing market on fire, fueled in part by a shortage of homes, it can be hard to imagine a city with high numbers of vacant homes, but that's the stark reality for a number of cities across the United States. A high number of vacant homes can be a signal for investors, indicating an opportunity or a warning. Take a look at the 10 cities with the most vacant homes today, and why it matters for investors.
Vacant homes can be an opportunity or a sign
Properties can be vacant for a number of reasons:
- Out-of-state owners may use the home seasonally or as a vacation property,
- The property is in foreclosure or preforeclosure; or
- The owner has passed, and the property is in probate.
Vacant homes can provide investors the opportunity to purchase properties at a discount, since these homes are often in some stage of distress. However, vacant properties can also be a signal of decreased housing demand, increased crime, or other concerns for owners and investors in the marketplace.
Outward migration trends can result in a decrease in homeownership and leave homes vacant, blighted, or abandoned, which results in fewer taxpayer dollars available to support general city services and difficulty in driving new interest to homeownership in the area.
Loss of major employers, such as a plant or factory closing, as well as lack of affordability, environmental factors, increase in crime in the neighborhood, or negative economic conditions are some of the reasons for decreased demand. Right now, large metro areas are seeing people flee cities in search of more affordable housing with more space during the global pandemic. What investors need to really look at is the underlying cause for the decreased demand and determine if it's a short-term result or a long-term trend.
Some cities will see demand for housing return, but other times, housing vacancies are sustained or even increase with time. In these instances, early signs of increased vacant homes can signal the demise of a city. Lack of industry or job opportunities are two of the largest underlying causes, but it can also be a sign of distress in a neighborhood. While it does happen, it's far less common for cities to experience a mass exodus on a large scale, like what's happened in Detroit.
Cities with the highest vacancy rates
Below are the cities leading the number of vacant homes as of the fourth quarter of 2020, according to Porch.com:
- Albany-Schenectady-Troy, New York (4.9%)
- Charleston-North Charleston, South Carolina (3.7%)
- Baton Rouge, Louisiana (2.7%)
- Tampa-St. Petersburg-Clearwater, Florida (2.2%)
- North Port-Sarasota-Bradenton, Florida (1.9%)
- Chicago-Naperville-Elgin, Illinois-Indiana-Wisconsin (1.9%)
- Louisville-Jefferson County, Kentucky-Indiana (1.7%)
- Little Rock-North Little Rock-Conway, Arkansas (1.7%)
- Tulsa, Oklahoma (1.7%)
- Charlotte-Concord-Gastonia, North Carolina-South Carolina (1.5%)
A few of the cities on this list are also among the fastest-growest cities and top real estate markets in the country, including Tampa-St. Petersburg-Clearwater and Charlotte. This means there's likely an underlying issue as to the increased number of vacant homes being tied to specific neighborhoods and areas of the city.
Other cities on the list are experiencing larger challenges that could lead to an increase in vacant homes, including a lack of job opportunities and economic industry. Investors should also keep in mind that homeowner vacancies are at their lowest levels since the 1970s, meaning there are still far fewer vacant homes than in the past.
The Millionacres bottom line
Investors should use this list to help investigate these markets further and determine if and where the opportunity lies. But in general, there's more opportunity for real estate investors to buy distressed properties in these areas.