New York and LA homes showed best risk-adjusted returns in the country

Though rising home prices and recent big-ticket office purchases have been held up as promising signs for economic recovery in major US cities, a Bloomberg column argues low price swings present a more encouraging forecast for some markets.

For a 12-month period ending on June 30, the risk-adjusted return on home investments in New York City was 2.45 percent, pacing the nation’s biggest cities, according to Bloomberg data. Los Angeles ranked right behind New York with a 2.27 percent return.

Rounding out the top five list in terms of return on home investment adjusted for risk are Tampa (2.12 percent), Washington DC (1.98 percent) and Boston (1.92 percent). Miami is among the cities to place in the top ten, tied with San Diego for seventh place.

When adjusted for risk, the returns of those two markets suggest a sustainable recovery for housing markets. Other cities have seen larger gains, but with a higher amount of volatility, making the value of those surges unclear.

For instance, the data show Phoenix has seen a 1.86 risk-adjusted return on home investments, ranking right outside the top five among major metros. But during the 12-month period, the housing market surged 29 percent compared to New York’s 17 percent.

During the same 12-month period, New York state has also seen the best return on bonds sold by its municipalities, another positive sign in the pandemic recovery. New York debt gained 4.1 percent.

While some metros are faring better than others on returns when adjusted for risk, the housing market is the tide that lifts all boats at the moment. In the second quarter, U.S. household real estate values jumped by $1.2 trillion, a record for a single quarter.

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[Bloomberg] — Holden Walter-Warner