The report analyzed single family rental returns in 375 U.S. counties each with a population of at least 100,000 and sufficient rental and home price data, along with more than 6,000 U.S. zip codes with a population of 2,500 more and sufficient rental and home price data. Rental data was from the U.S. Department of Housing and Urban Development, and home price data was from publicly recorded sales deed data collected and licensed by ATTOM Data Solutions (see full methodology below).
The average annual gross rental yield (annualized gross rent income divided by median purchase price of single family homes) among the 375 counties was 9.0 percent for 2017, down from an average of 9.1 percent in 2016.
"While good returns on single family rentals are hard to come by in high-priced coastal markets and in some other housing hot spots such as Denver and parts of Dallas, Austin and Nashville, solid returns on single family rentals will continue to be available in many parts of the Southeast, Rust Belt and Midwest for investors purchasing in 2017," said Daren Blomquist, senior vice president at ATTOM Data Solutions. "And single family rentals should continue to yield strong returns in many parts of the country going forward given the market undercurrents of low rent-ready housing inventory and low homeownership rates. Average fair market rents increased in 2017 in 86 percent of the markets we analyzed even while average wage growth outpaced rent growth in 67 percent of markets — a recipe for sustainable growth in the rental market."
Counties in Georgia, Maryland, Pennsylvania post highest single family rental returns
Counties with the highest annual gross rental yields were Clayton County, Georgia, in the Atlanta metro area (23.7 percent); Baltimore City, Maryland (23.6 percent); Bibb County, Georgia, in the Macon metro area (23.5 percent); Monroe County, Pennsylvania, in the East Stroudsburg metro area (20.6 percent); and Saginaw County, Michigan (18.8 percent).
Counties with lowest single family rental returns
Counties with the lowest annual gross rental yields were Arlington County, Virginia, in the Washington, D.C., metro area (3.4 percent); Williamson County, Tennessee, in the Nashville metro area (3.9 percent); Santa Cruz County, California (4.1 percent); Norfolk County, Massachusetts, in the Boston metro area (4.2 percent); and Santa Clara County, California, in the San Jose metro area (4.2 percent).
Rental yields decrease in 57 percent of markets
Median sales prices for single family homes rose faster than average fair market rents in 213 of the 375 counties (57 percent), resulting in declining gross annual rental yields in the same percentage of counties.
"Unlike their apartment counterparts, single-family home rental rates in the greater Seattle area have leveled off significantly," said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market, where in King County the annual gross rental yield in 2017 is down from 2016 thanks to median home prices increasing 5 percent compared to a 1 percent increase in average fair market rents. "While home prices in this area continue to see steep increases, rents have not followed suit. I believe this is because the incomes of those who rent single-family homes are not keeping pace with rising home prices, so rents have had to adjust to the realities of the market.
"Single-family home rental rates will likely continue to see very modest increases, as many of these renters are converting to buyers," Gardner continued. "In fact, 'Boomerang Buyers', who were forced to become renters when they lost their homes to foreclosure, are now in a position to qualify for a mortgage again. This process could lead to declining demand for single-family rentals, forcing landlords to adjust their rents accordingly in order to keep their properties occupied."
Best SFR growth markets in Ohio, New York, Georgia, Pennsylvania
Best millennial SFR markets in Detroit, Duluth, Kansas City, Oklahoma City
The report also identified and ranked the 10 best counties for renting single family homes to millennials.
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SOURCE ATTOM Data Solutions