Most investors pick a market the way they pick a restaurant: it's close, a friend likes it, or it showed up on a "hottest cities" list. Then they spend months of marketing money in a place where the numbers were never going to work.
You can avoid most of that with five data points: income, home values, rents, vacancy, and mortgage rates. None of them is hard to find. The skill is reading them together. We covered the broader checklist (population, jobs, permits) in How to Analyze a Real Estate Market Before You Invest. This post goes one level deeper on the five numbers and shows how they combine into a simple Buy, Watch, or Avoid call.
Start With This Fall's National Benchmarks
A local number only means something next to a baseline. Here's where the country stands right now:
| Data point | National figure | Source |
|---|---|---|
| Median household income (2025) | $87,460 | U.S. Census Bureau, Sept 15, 2026 |
| Median existing-home price (Sept 2026) | $417,500, up 1.3% from a year ago | National Association of REALTORS®, Oct 13, 2026 |
| Typical asking rent (Sept 2026) | $1,932, up 2.7% from a year ago | Zillow Rental Market Report, Oct 15, 2026 |
| Rental vacancy rate (Q2 2026) | 7.3% | U.S. Census Bureau Housing Vacancy Survey, July 28, 2026 |
| 30-year fixed mortgage rate | 7.40% (week of Oct 15, 2026), vs. 6.27% a year earlier | Freddie Mac PMMS |
Two things stand out. Borrowing costs are more than a full point higher than a year ago, and Zillow reports rental demand up 19.2% year over year as would-be buyers stay renters. That combination changes which markets work and for which strategy.
1. Income: Who Can Pay the Rent (or Buy Your Flip)
Income is the ceiling on everything else. Rents and resale prices can only stretch so far past what local households earn.
The quick check is rent-to-income: take annual rent and divide by the area's median household income. Around 30% is the traditional affordability line. If local rents already eat well past 30% of median income, there's not much room for rent growth, and turnover and collections get harder.
Nationally, Zillow's typical rent of $1,932 a month is $23,184 a year, about 26.5% of the $87,460 median income. That's a little room, but not a lot.
2. Home Values: What You're Paying for Each Dollar of Income
The quick check here is price-to-income: median home price divided by median household income. Using the national figures above, that's $417,500 ÷ $87,460, or about 4.8. (Those two numbers come from different surveys, so treat it as a rough benchmark, not a precise ratio.)
A market well below that ratio usually means cheaper entry and better odds of cash flow. A market well above it usually means you're paying up for appreciation potential, and the rent rarely covers the payment.
3. Rents: The Number That Pays the Mortgage
For rental and BRRRR investors, the key check is rent-to-price: monthly rent divided by purchase price. Higher means more rent for every dollar you spend. You'll hear rules of thumb like "1%," but at today's rates the real test is whether rent covers the full payment and expenses, which is exactly what the worked example below does.
Also look at direction. Rents that are rising modestly with demand are healthier than rents that just spiked and are now flattening out.
4. Vacancy: The Early Warning Light
Vacancy tells you how much pricing power landlords have. The national rental vacancy rate was 7.3% in Q2 2026, per the Census Bureau. A market running well below the national rate means units fill quickly and you can hold market rent. A market running well above it, often because a wave of new apartments just delivered, means concessions, longer turnover, and softer rents for a while.
Vacancy shows up in your numbers before price does. A rising local vacancy rate is often the first sign a market is shifting from Buy to Watch.
5. Mortgage Rates: The Same Everywhere, Felt Differently
Rates are set nationally, but they don't hit every market equally. The more expensive the market, the more each point of interest costs you in dollars. At 7.40%, a market where the rent-to-price ratio was "fine" two years ago may now run negative every month.
Keep in mind that the Freddie Mac rate is for owner-occupied loans with 20% down and excellent credit. Investor loans usually price higher, so use a realistic quote from your lender, not the headline rate.
Putting It Together: Two Example Markets
Here's how the five numbers combine. These are example markets with made-up numbers, chosen to show the method.
| Market A | Market B | |
|---|---|---|
| Median household income | $70,000 | $95,000 |
| Median home price | $230,000 | $520,000 |
| Typical single-family rent | $1,750/mo | $2,600/mo |
| Rental vacancy | 6.0% | 8.5% |
| Price-to-income | 3.3 | 5.5 |
| Rent-to-price (monthly) | 0.76% | 0.50% |
| Rent-to-income | 30.0% | 32.8% |
Now run a median-priced rental in each market with these assumptions: 25% down, an 8.0% investor rate on a 30-year loan, vacancy at the local rate, and operating expenses (taxes, insurance, repairs, management, and reserves) at 35% of rent.
Market A at $230,000:
- Loan: $172,500, payment about $1,266 a month
- Rent after vacancy: $1,750 × 94% = $1,645
- Expenses: $1,750 × 35% = $612.50
- Net operating income: $1,645 − $612.50 = $1,032.50 a month
- Cash flow: $1,032.50 − $1,266 = about −$233 a month
Market B at $520,000:
- Loan: $390,000, payment about $2,862 a month
- Rent after vacancy: $2,600 × 91.5% = $2,379
- Expenses: $2,600 × 35% = $910
- Net operating income: $2,379 − $910 = $1,469 a month
- Cash flow: $1,469 − $2,862 = about −$1,393 a month
Neither works at the median price. That's the honest reality of a 7%-plus rate environment. But they fail very differently.
In Market A, the property breaks even if you buy at about $187,600, roughly 18% below the $230,000 median price. To hit a 1.2 debt service coverage ratio (net operating income 20% above the loan payment, a common lender and investor cushion), you'd need to buy around $156,300, about 32% below that median. That's a real target for an off-market, distressed, or value-add deal. Market A is a Buy for cash flow investors who buy right, and a Watch for anyone paying retail.
In Market B, the payment is nearly double the net operating income. No realistic discount closes that gap, and vacancy above the national rate adds risk. Market B is an Avoid for rentals right now. It might still work for a well-bought flip if resale demand is strong, but that's a different analysis.
Notice what the call depends on: your strategy. That's why we put picking a strategy first, as covered in How to Choose the Right Real Estate Investing Strategy for You. If you're weighing rental types inside a market you like, STR vs. MTR: Which Rental Strategy Fits Your Market is a good next read.
A Simple Process You Can Repeat
- Pick two or three candidate markets you could realistically work, whether local or long-distance.
- Pull the five numbers for each: median income, median price, typical rent, rental vacancy, and a real investor rate quote.
- Run the three ratios: price-to-income, rent-to-price, and rent-to-income. Compare them to the national benchmarks above.
- Run one median-priced deal through a full payment and expense check, then solve for the purchase price where it works.
- Make the call: Buy, Watch, or Avoid, for your strategy. Only then spend money on marketing.
How FORGE Helps
FORGE's Market Oracle takes income, home values, rents, vacancy, and mortgage rates for a market and returns a Buy, Watch, or Avoid verdict, so you're comparing markets on the same scale every time. From there, the Deal Analyzer lets you run a specific property's payment, expenses, and cash flow, and the ARIS AI Coach can talk you through why a market scored the way it did for your budget and strategy.
Want to see it on your own target markets? Book a 1:1 FORGE demo.