Positive economic indicators typically include a strong U.S. dollar, job gains, lower oil prices, increased consumer spending, and general improvements in the housing and business sectors.
WalletHub identified that states that embody these conditions, finding that Utah, Washington, and California, by far, have the best economies.
In order to identify the best-performing state economies, WalletHub’s analysts compared the 50 states and the District of Columbia across three key areas: economic activity, economic health, and innovation potential. In addition, the states were scored based on 23 metrics and given a value between 0 and 100 (wherein 100 represents the most favorable economic conditions for a state and 0 the least).
Utah’s total WalletHub score was 71.55 on the list, while Washington and California had scores of 70.68 and 67.84, respectively.
For real estate investors, better economies could mean more opportunities in a flourishing housing market.
With more than 15 years of experience in the SFR market, Tim Herriage, CEO, 2020 REI Investment told MReport that he focuses on economic fundamentals when it comes to deciding where to invest. “I have always focused on jobs and schools as the main driver for my investment decisions,” he said. “Chasing high rents, without understanding the important underlying fundamentals: leads to poor investment decisions.”
The markets targeted by the larger institutional investors have done well by and large, with many of the markets having gone up nearly 30 percent from the beginning of their aggregation phase, according to Herriage. This is not representative of the mass market, however.
“Those that live in markets where achieving an acceptable gross yield is not probable tend to invest out-of-state but not in markets where rents are high,” Herriage said. “I see them investing in places like Ohio in Indianapolis. Here for a $60,000 house you can get $800 a month rent.”
This strategy, however, is a “cash flow play,” according to Herriage; he said, “If you can find a market, like Dallas, that has good job growth, good schools, and middle-of-the-road, you, the drivers of the reinvestment will turn out much better over the test of time.”
WalletHub’s 2016’s States with the Best Economies:
- Utah (71.55)
- Washington (70.68)
- California (67.84)
- Massachusetts (65.58)
- Colorado (60.81)
- Delaware (59.85)
- District of Columbia (59.50)
- New York (58.82)
- Texas (58.74)
- Oregon (57.48)
Among the states with the worst U.S. economies are Mississippi (31.86), Arkansas (33.94), West Virginia (34.31), Maine (34.34), and New Mexico (34.52), according to the report.
In response to the survey, experts provided their advice to WalletHub on how state and local officials can boost local economies effectively.
Gregory S. Burge, Associate Professor of Economics at University of Oklahoma, College of Arts and Sciences said that “consistent and effective stewardship of tax revenues should be their focus” and “government officials should also “know their economy.””
“First, one should ask why boost the local economy. If it is only to be re-elected, then one should pause,” said Giuseppe Moscarini, Professor of Economics at Yale University. “If it is because the local economy does need a boost, then the right policy depends on why it needs it, what’s wrong with the local economy. Some states have ageing population. Others have infrastructure problems. Yet others have higher taxes. And so on. Boosting per se can be very detrimental to welfare, by introducing new distortions, subsidies, misallocation, keeping afloat businesses that should exit, ect.”
Editor’s note: The Second Annual Five Star Single-Family Rental Summit will be November 1-3 in Frisco, Texas. The Five Star Institute is the parent company of MReport and TheMReport.com.