May 15, 2019
Compound, a company that owns and operates city-specific residential real estate funds, released its Q1 2019 Residential Real Estate Rankings report. In that report, the company listed the best and worst of 40 cities, when it came to residential investments over the past year — and Indianapolis took top spot as the best.
In its rationale, Compound noted that it measured risk by calculating the volatility of each MSA’s average home price, doing so by focusing on the standard deviation of price changes over the past 20 years. That, combined with data from the Zillow Home Value Index, leads to the Sharpe ratio, developed by Nobel laureate William F. Sharpe. The ratio helps investors measure the return on an investment, compared to its risk. When it came to Indianapolis, prices appreciated 12%, year over year, providing a decent reward-risk combination, according to Compound’s analyst.
Meanwhile, San Jose, CA came in last place when it came to residential investments, with an annual home price appreciation in negative territory. In fact, the worst-performing cities were mainly concentrated on the West Coast, according to the Compound analysis.
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