Returns on single-family rentals are declining as home prices surge, according to a new Single-Family Rental Market report released by ATTOM.
The report looked at single-family rental yields in 212 U.S. counties with a population of at least 100,000 and 1Q22 rental and home price data collected from ATTOM’s nationwide property database, as well as publicly recorded sales deed data. Average gross rental yields before expenses on three-bedroom, single-family homes purchased by landlords this year are decreasing in 72% of the counties included, according to the report.
Most declines are less than 1% from rental yields in 2021, but rental yields are dropping in about three-quarters of markets where median home prices exceeded $250,000 in the first quarter of 2022, the report says. Gross returns are decreasing in two-thirds of markets where homes typically sell for less than $250,000—mostly the Midwest and South. Returns remain above 8% in more than half of those counties.
As yields are declining, prices are still rising—median prices for three-bedroom houses increased at least 15% from 2021 to 2022 in half of the counties analyzed, while average rents went up by that much in only one-third of those markets, the data showed.