SFR Rental Yields Are Projected to Rise This Year
By Barbara Ballinger
April 12, 2023
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We take a look at where to find those markets with rising rents.
The average annual gross rental yield on three-bedroom properties among 212 counties nationwide is projected to be 7.5% this year, up from its 6.7% average a year ago, according to a recently released report from ATTOM, a leading curator of land, property and real estate. The report analyzed the single-family rental returns of 212 U.S. counties with a population of at least 100,000 and sufficient rental and home price data.
The numbers reflected the first rise nationwide since 2019. Moreover, the yield increased from 2022 to 2023 in 91% of the counties, after declining to 72% in the prior time frame.
Data also revealed that rents are increasing faster than home prices for most of the country, or in 192 and 91% of the counties. More typically, rents are rising by between 5% and 20%, while changes in home values are trending from a 5% loss to a 5% gain. The result, says Rob Barber, ATTOM’s Chief Executive Officer, is that “The broader housing market didn’t fare nearly as well in 2022 as it did in 2021.”
These results have put the spotlight on single-family homes to rent, whose lease costs are growing, versus for-sale prices that have flattened, which has helped boost yields for landlords for the first time in several years, Barber says. Here are five questions that focus more on the trend:
Where are rental prices rising?
The top returns are in Indian River County, Fl., Collier County, Fla., Wayne County, Mich., Mercer County, N.J., and Charlotte County, Fla., as well as in other parts of the South, Midwest and Northeast regions. In Indian River, the annual gross rental yield was 15%, versus Charlotte at 12%. Also noteworthy is that among the top 50 rental returns for counties analyzed, 29 are in the South, 13 in the Midwest and eight in the Northeast. None are in the West.
Where are rental returns the lowest?
These are in San Francisco, San Jose, Provo, Honolulu and Washington, D.C., metro areas, along with other Western markets. Specifically, counties with the lowest potential annual gross returns for 2023 on three-bedroom rentals are Santa Clara County, Calif., in the San Jose metro area (3.3 %), San Mateo County, Calif., in the San Francisco metro area (3.7%), Utah County, Utah, in the Provo metro area (3.8%), Honolulu County in Honolulu, Hi, metro area (4.2%) and Loudoun County, Va., (4.2%). Among the bottom 50 potential rental returns for counties analyzed 2023, 34 are in the West, 14 in the South and one each in the Northeast and Midwest.
Where are rents rising faster than wages?
Rental amounts are rising faster than wages in 147 of the 212 counties analyzed (69%), including in Los Angeles County, Calif., Cook County (Chicago), Ill., Harris County (Houston), Texas, San Diego County, Calif., and Orange County, Calif., outside Los Angeles. Wages are increasing faster than rents in 65 of the 212 counties analyzed including Maricopa County (Phoenix), Ariz., Dallas County, Texas, Clark County (Las Vegas), Nev., Tarrant County (Fort Worth), Texas and Hillsborough County (Tampa), Fla.
Where are rents rising faster than home prices?
Rental amounts are rising faster than home prices in 192 of the 212 counties analyzed. Those include Los Angeles County, Calif., Cook County (Chicago), Ill., Harris County (Houston), Texas, Maricopa County (Phoenix), Ariz., and San Diego County, Calif. And home prices are going up faster than rental amounts in 20 of the counties analyzed including Nassau County, N.Y. (outside New York City), Collin County (Plano), Texas, Pima County (Tucson), Ariz., St. Louis County, Mo., and Westchester County, N.Y. (outside New York City).
Where are the best single-family rental growth markets?
The report identified 17 counties where wages grew over the past year and potential 2023 annual gross rental yields exceed 10%, and include Cook County (Chicago), Ill., Wayne County (Detroit), Mich., Cuyahoga County (Cleveland), Ohio, Shelby County (Memphis), Tenn., and New Haven County, Conn.
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