Phoenix had the highest total returns in the past five years. New York had the lowest.
The most widely reported statistic about housing is price appreciation. Knowing the rate of appreciation is crucial for valuing homes accurately. However, looking at appreciation alone does not convey the full benefits of owning a home. This can be more accurately measured by the sum of price appreciation and rental income flows—the total appreciation.
Owning a home is analogous to owning stock in that there are two ways to make money from it. You can let the asset appreciate and resell it to collect the capital gains, or you can hold the asset and collect dividends, like collecting rent from a home. Only looking at one or the other will not measure the full return. Even if you are living in your own property and not collecting rent, you still benefit because you are not paying rent. This opportunity cost is often referred to as imputed rent.
You can measure total return by combining the CoreLogic Home Price Index (HPI) and Single-Family Rent Index (SFRI). It is the sum of price appreciation and all rent over a certain time divided by the initial purchase price[1].
Figure 1: National Total Returns, Rent, Price (Annual)

Figure 1 shows national rent returns, price returns and total returns from 2005 to 2021. Historically, rental returns have proven more stable than appreciation. Since 2005, annual rent has ranged from only 5 to 8 percent of prices, compared to price appreciation between -18 and 20 percent over the same period. This means that which component matters more will vary year by year, but given the rarity of price growth that exceeds 5-8 percent, rent will usually give a better return.
Figure 2: 5-Year Returns

1-year returns communicate interesting information about trends in the market, but most investors or homeowners plan to hold properties for longer periods, so an interval such as five or 10 years is more relevant. Figure 2 shows that at the end of 2021, 5-year home price appreciation was 50 percent. Though this is a huge return, it is far exceeded by the total return of 89 percent for the same period.
Table 1: Top Ten Metros for Total Return at the end of 2021[2]
5 Year Total Return | 5 Year Price Return | 5 Year Rent Return | |
Phoenix-Mesa-Scottsdale, AZ | 119.59% | 80.35% | 39.24% |
Tampa-St. Petersburg-Clearwater, FL | 119.32% | 67.61% | 51.72% |
Detroit-Dearborn-Livonia, MI | 115.29% | 41.95% | 73.34% |
West Palm Beach-Boca Raton-Delray Beach, FL | 110.02% | 51.95% | 58.07% |
Las Vegas-Henderson-Paradise, NV | 108.69% | 68.52% | 40.18% |
Rochester, NY | 107.37% | 39.77% | 67.60% |
Jacksonville, FL | 107.02% | 62.12% | 44.90% |
Fort Worth-Arlington, TX | 103.35% | 54.17% | 49.18% |
Tucson, AZ | 103.11% | 61.38% | 41.73% |
Riverside-San Bernardino-Ontario, CA | 102.68% | 61.23% | 41.45% |
Looking at total return locally can show just how overwhelming recent price appreciation has been. For all 10 MSAs, the 5-year price return exceeded the 5-year rent return.
Table 2: Bottom Ten Metros for Total Return at the end of 2021
5 Year Total Return | 5 Year Price Return | 5 Year Rent Return | |
New York-Jersey City-White Plains, NY-NJ | 50.72% | 17.41% | 33.31% |
San Francisco-Redwood City-South San Francisco, CA | 51.98% | 29.74% | 22.23% |
Bridgeport-Stamford-Norwalk, CT | 54.58% | 24.10% | 30.49% |
Urban Honolulu, HI | 56.08% | 31.80% | 24.28% |
Washington-Arlington-Alexandria, DC-VA-MD-WV | 63.08% | 29.03% | 34.04% |
Baltimore-Columbia-Towson, MD | 67.36% | 24.55% | 42.81% |
New Orleans-Metairie, LA | 69.08% | 27.76% | 41.32% |
Boston, MA | 69.99% | 33.83% | 36.16% |
San Jose-Sunnyvale-Santa Clara, CA | 70.19% | 49.33% | 20.86% |
Nassau County-Suffolk County, NY | 71.41% | 33.57% | 37.84% |
The bottom 10 is dominated by large coastal cities such as New York and San Francisco. This is something of a departure from historical norms. Such cities usually have low rental returns but made up for it with high price appreciation. However, during the past two years, they have missed the huge appreciation other markets have seen and still have low returns through rent.
Figure 3: Average Annual Rent Returns vs. Average Annual Price Returns, 2010 – 2021

Price returns and rent returns are negatively correlated. It is rare to find a location that gets both or none. This can alter the perceptions of what the most valuable locations to own real estate in are compared to looking at prices only. Looking solely at prices, California has been the best place to accrue value on a home for the past couple of decades. This flips when we bring rent into the picture. Metros like San Francisco, Oakland and San Jose have experienced huge price gains due to demand for the areas’ high-paying jobs butting up against its restrictive housing supply. However, the rent returns in the Bay Area are lacking compared to locations in the areas like the Midwest. Chicago, for instance, has appreciated at an average annual rate of 1.7% over the last 10 years, but has made up for that by making an average rent return of just under 10%. Rent and prices show that local housing markets follow a classic risk-reward relationship. You can bet on a place that receives high rent returns, like Chicago, and it will likely produce greater returns year-in-year than a property somewhere like San Francisco. When you resell, however, San Francisco will likely give you a much greater return, but like any risky asset, this depends on the timing of the sale. In any case, you can have a good return on rent or a good return on price; getting both, though is unlikely.
[1] Specifically, total return is calculated by taking median house price and rent in a base period, and extrapolating it forward and backward using the HPI and SFRI. With prices and rent in hand for every month in the data, we can calculate both price appreciation and the rent return in for any given period. These two are added together to get the total return.
[2] Metros are Metropolitan Statistical Areas defined by the Office of Management and Budget boundaries. We considered only metros with only over 10,000 home sales a year.