Yields for single-family rental homes are falling in three-quarters of U.S. counties;
Mid-priced and high-priced markets reap smaller profits, facing more declines;
Average returns for three-bedroom rentals range mostly from 5-10%
IRVINE, Calif., May 20, 2022 /PRNewswire/ — ATTOM, a leading national real estate data curator for land and real estate data, today released a new report on the single-family rental market showing that profit margins on 3-bedroom single-family home rentals decline each year in 2022 across most of United Statesand are slightly more likely to decline in areas that already have lower yields.
The report analyzed rental yields for single-family homes in 212 U.S. counties with at least 100,000 residents and sufficient rent and house price data as of the first quarter of 2022. Rent and house price data were collected from ATTOM’s national real estate database, as well as publicly. data from deeds of sale registered under license by the company (see complete methodology below).
The report shows that average gross rental returns before expenses from three-bedroom single-family homes purchased by owners this year are declining in 72% of the counties included in the report. (Latest returns are based on 2022 annualized gross rental income divided by median purchase prices in the first quarter of 2022).
Most of the declines are less than a percentage point from rental yields in 2021. But rental yields are falling in about three-quarters of the markets where median home prices have topped $250,000 in the first quarter of 2022. The report further shows that these markets typically have lower profit margins, with yields typically falling below 7%.
Meanwhile, gross yields are falling in two-thirds of markets where homes typically sell for less than $250,000, located primarily in the Midwest and South. Yields remain above 8% in more than half of these counties, despite declines.
The drop in single-family rental yields comes as the prices homeowners have to pay to buy properties are rising faster than rents. Median prices for three-bedroom homes have increased by at least 15% from 2021 to 2022 in half of the counties analyzed, while average rents have increased by the same amount in only a third of these markets.
“Investors who own single-family rental properties have seen their margins squeezed over the past year as home prices have risen faster than rental rates,” said Rick Sharga, Executive Vice President of Business Intelligence at ATTOM. “The good news for these landlords is that their yields should improve as annual rental rates increase, and they should also benefit from house price appreciation over time.”
House prices soared last year – the latest in a decade of boom – as a glut of home buyers continued to seek a historically low supply of homes for sale. Buyers continued to flood the market at a time when mortgage rates were below 3% and many households were looking to swap congested areas most vulnerable to the ongoing coronavirus pandemic for the wider spaces offered by single-family homes. and construction sites.
Single-family rentals yield 7% in half the country
Among 212 counties with enough data to analyze in the first quarter of 2022, returns before expenses for three-bedroom single-family rentals are at least 7% this year in 98 (46%) counties.
Top returns include Collier County (Naples), FL (16 percent yield); Atlantic County (Atlantic City), NJ (12.2 percent); Mercer County (Trenton), NJ (11.6 percent); Indian River County (Vero Beach), FL (11%) and Charlotte County, Florida (outside Fort Myers) (10.7%).
The lowest yields of 2022 on three-bedroom single-family rentals are in Santa Clara County (San Jose), CA (3.1 percent); San Mateo County (outside San Francisco) (3.2 percent); Williamson County, Tennessee (outside Nashville) (3.9 percent); San Francisco County, California (3.9%) and Fayette County (Lexington), KY (3.9%).
Largest single-family rental yields in the cheapest counties, smallest in the most expensive markets
Yields on new three-bedroom single-family home rentals exceed eight percent in about six in ten counties where homes typically sell for less than $250,000 in the first quarter of 2022. They include Atlantic County (Atlantic City) (12.2% yield), NJ; Wayne County (Detroit), MI (10.7 percent); Jefferson County (Beaumont), TX (10.1 percent); Hamilton County (Cincinnati), OH (9.8%) and Montgomery County, AL (9.7 percent).
Yields are below six percent in about three-quarters of the counties with first-quarter median prices of at least $500,000. The little ones are in Santa Clara County (San Jose), CA (3.1 percent); San Mateo County, California (outside San Francisco) (3.2 percent); Williamson County, Tennessee (outside Nashville) (3.9 percent); San Francisco County, California (3.9%) and Kings County (brooklyn), NY (4%).
Less decline in rental yields in low-cost neighborhoods
Rental yields for single-family homes are falling in about two-thirds of counties with median home values below $250,000concentrated in the Midwest and South, while yields fall in three-quarters of markets elsewhere.
Counties with median home prices below $250,000 where yields fall the most include Fayette County (Lexington), KY (yield down from 6.1% in 2021 to 3.9% in 2022); Richmond County (August), GA (down 10.3% to 9%); Jefferson Parish, LA (outside New Orleans) (from 9.7% to 8.6%); Onslow County (Jacksonville), NC (down from 6.6% to 5.6%) and Philadelphia County, Pennsylvania (down from 9.2% to 8.1%).
Counties with median home prices over $500,000 where new rental yields are falling the most include Kings County (brooklyn), NY (yield down from 7.6% in 2021 to 4% in 2022); New York County (manhattan), NY (down 9.3% to 6.9%); Norfolk County, MA (outside Boston) (from 7.7% to 6.1%); Suffolk County (Boston), MA, (down 6.7% to 5.3%) and Williamson County, Tennessee (outside Nashville) (from 4.9% to 3.9%).
Rents are rising faster than wages in three-quarters of counties measured
Average three-bedroom rents are growing faster than wages in 155 of the 212 counties analyzed (73%), including Harris County (Houston), TX; Maricopa County (Phoenix), A-Z; San Diego County, California; Dallas County, Texasand Riverside County, California (outside Los Angeles).
Salaries are growing faster than rents in 57 of the 212 counties analyzed (27%), including Los Angeles County, California; Cook County (Chicago), HE ; Orange County, California (outside Los Angeles); Kings County (brooklyn), NY, and Miami-Dade County, Florida.
“The fact that wages are rising faster than rental rates in some of the country’s largest metropolitan areas could be due to COVID-19,” Sharga added. “The flow of urban renters to the suburbs, where they have become homeowners, has been accelerated by the pandemic, causing relatively high vacancy rates in places like New York, Chicagoand Los Angelesand many of those markets are still recovering.”
Prices are rising faster than wages in nine out of ten markets
Median three-bedroom single-family home prices are growing faster than average wages in 195 of the 212 counties analyzed (92%), including Los Angeles County, California; Harris County (Houston), TX; Maricopa County (Phoenix), A-Z; San Diego County, California; and Orange County, California (outside Los Angeles).
Wages are growing faster than prices in only 17 of the counties analyzed (8%), including Cook County (Chicago), HE ; Montgomery County, MD (outside washington d.c.); Westchester County, New York State (outside New York City); Fairfield County (Stamford), CT and San Francisco County, California.
For this report, ATTOM looked at all US counties with a population of 100,000 or more and sufficient data on housing prices and rental rates. Rental yields were calculated using annual gross rental yields: from rental data collected and authorized by ATTOM, annualized and divided by the median sale price of residential properties in each county. ATTOM also incorporated weekly wage data from the Bureau of Labor Statistics.
ATTOM provides superior real estate data to power products that improve transparency, innovation, efficiency and disruption in a data-driven economy. Multi-source ATTOM property tax, deed, mortgage, foreclosure, environmental hazard, natural hazard, and neighborhood data for over 155 million residential and commercial properties in the United States covering 99% of the population from the country. A rigorous data management process comprising more than 20 steps validates, standardizes and improves the real estate data collected by ATTOM, by assigning each property record a unique and persistent identifier – the ATTOM identifier. The 20TB ATTOM Data Warehouse powers innovation across multiple industries, including mortgage, real estate, insurance, marketing, government, and more, with flexible data delivery solutions that include bulk file licensing, real estate data APIs, real estate market trends, property reports, and more. We also introduce you to our newest innovative solution, which provides immediate access and streamlines data management – ATTOM Cloud.
Data and Reports License: