According to the ATTOM Data Solutions 2021 U.S. Single-Family Rental Market Report, among nearly 500 U.S. counties analyzed, the average annual gross rental yield for 2021 is 7.7%, down from an average of 8.4% in 2020.
The report analyzed single-family rental returns in 495 U.S. counties, each with a population of at least 100,000, and sufficient rental and home price data. Rental data came from the U.S. Department of Housing and Urban Development, and home price data from publicly recorded sales deed data collected and licensed by ATTOM Data Solutions.
Those counties posting the greatest decreases in rental returns include Baltimore City/County, Maryland (yield down 43.9%); St. Louis City/County, Missouri (down 35.5%); St. Louis County, Missouri (down 29.3%); Bonneville County (Idaho Falls), Idaho (down 26.7%); and Fairfield County (Stamford), Connecticut (down 24%).
“The single-family home rental business is less profitable this year compared to last year across most of country, with yields on the average deals decreasing. That’s happening as home prices on properties that investors are paying for, in most areas, are rising considerably faster than rents, which is cutting into their profit margins,” said Todd Teta, Chief Product Officer at ATTOM Data Solutions. “Nevertheless, returns on single-family rentals still generally remain strong and there are pockets, especially in the Midwest, where yields top 10%. There also are some signs that things could improve this year given that home prices are increasing faster than rents.”
Among the top 50 highest rental returns for counties analyzed in 2021, 25 are in the Midwest, 15 are in the South and 10 are in the Northeast. According to the report, counties with the highest potential annual gross rental yields for 2021 include Schuylkill County, Pennsylvania (26.1%); Bibb County, Georgia (18.1%); Baltimore City/County, Maryland (16.2%); La Salle County, Illinois (14.1%); and Chautauqua County, New York (13.7%).
The counties with the lowest potential annual gross rental yields for 2021 include Williamson County, Tennessee (3.7%); Santa Clara County, California (3.8%); San Mateo County, California (3.8%); San Francisco County, California (3.9%); and Maui County, Hawaii (3.9%).
With home prices rising faster than rents in most of the country, homeownership is growing increasingly unaffordable, placing upward pressure on rents.
To that end, single-family home prices are rising faster than rents in 86.9% of the counties analyzed, including Los Angeles County, California; Cook County (Chicago), Illinois; Harris County (Houston), Texas; Maricopa County (Phoenix), Arizona; and San Diego County, California.
The report also noted that rents are rising faster than single-family home prices in 13.1% of the counties analyzed, including Duval County (Jacksonville), Florida; San Francisco County, California; San Mateo County, California, in the San Francisco metro area; Fort Bend County, Texas, in the Houston metro area; and Kane County, Illinois, in the Chicago metro area.
And as the single-family rental market continues to redefine its borders, the sky is the limit for the industry. Navigating this dynamic terrain takes careful planning and strategic partnerships.
At the upcoming 2021 Single-Family Rental Summit, presented by The Five Star Institute, set for Wednesday, May 12 at the Four Seasons Resort and Club in Irving, Texas, top subject matter experts and skilled single-family rental practitioners will lead discussion panels and training sessions. The 2021 SFRS will answer questions and offer viable solutions related to property acquisition and management, financing, strategies for small, midcap, and large investors, and new developments related to technology and professional services.
Click here for more information on this event.