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Reporter’s notebook: Cap rates, wastewater and foreclosures

Last week, California-based HomeUnion Inc., an online operator of investment property marketplaces, announced its ranking of the most and least favorable single-family rental property markets. Central Pennsylvania was not in the mix.

But 44 other large markets were, including Philadelphia, which was No. 14 with a capitalization rate of 5.7 percent.

A cap rate is the rate of return on an investment property based on the income that the property is expected to generate.

Memphis was No. 1 with a cap rate of 7.3 percent, while San Francisco was the lowest at 2.7 percent.

With that said, HomeUnion was able to research some smaller markets for the Business Journal.

What they found was that cap rates here in Central Pennsylvania are stronger than Memphis. The Harrisburg area came in at 8.1 percent, while York County was at 8 percent, according to HomeUnion. 

Other regional data was not immediately available.

“Other asset classes underperformed in 2015, while single-family rental investors saw healthy returns in terms of income and appreciation in markets across the country,” Steve Hovland, HomeUnion’s manager of research services, said in the original report. 

He cited favorable supply and demand fundamentals, as well as shifting views about renting among millennials and senior citizens. That created increased occupancy rates, which resulted in higher rent prices, Hovland said.

Pittsburgh had a cap rate of 6.4 percent, while Baltimore was at 5.9 percent in the HomeUnion report. New York City was at 3.5 percent, while Los Angeles was at 3.2 percent.

Wastewater expansion

In December, Derry Township-based Pennsylvania American Water announced it had acquired the Fairview Township wastewater system in northern York County for $16.8 million.

The commonwealth’s largest water utility picked up about 4,000 customers in Fairview Township, including more than 200 businesses and commercial accounts. It’s also investing $13 million in the York County system.

But Pennsylvania American Water isn’t stopping there as it continues to grow its wastewater accounts.

The Dauphin County water utility’s public parent company, American Water Works Co. Inc., said in its fourth-quarter earnings call last week that Pennsylvania American Water is in the process of expanding its reach in the Scranton area.

A memorandum of understanding was signed in December for the potential acquisition of the wastewater assets of the Scranton authority. The authority serves about 31,000 customers. 

Foreclosures dip

Foreclosure rates are not falling as fast in Harrisburg-Carlisle as they are in the commonwealth and nationally, according to recent data from California-based CoreLogic.

But rates are still lower in the Harrisburg area. 

In December, the foreclosure rate locally was 1.08 percent. That was down from 1.28 percent a year earlier.

In Pennsylvania, the foreclosure rate dipped to 1.58 percent from 1.87 percent in December 2014, according to CoreLogic. In the U.S., the December foreclosure rate was 1.2 percent compared with 1.5 percent a year earlier.

Other regional data was not immediately available.

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