Highest Potential SFR Returns in Indian River, Collier, Wayne, Mercer, Charlotte Counties; Best Returns Concentrated in South, Midwest and Northeast, Lowest in West; Rental Returns Increase From 2022 in About 90 Percent of Counties Analyzed, Reversing Years of Decline
IRVINE, Calif. – Mar. 16, 2023 —ATTOM, a leading curator of land, property, and real estate data, today released its Q1 2023 Single-Family Rental Market report, which ranks the best U.S. markets for buying single-family rental properties in 2023.
The report analyzed single-family rental returns in 212 U.S. counties with a population of at least 100,000 and sufficient rental and home price data. The analysis for this report incorporated median rents on 3-bedroom properties and median single-family home prices collected from ATTOM’s nationwide property database, as well as publicly recorded sales deed data licensed by ATTOM (see full methodology below).
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The report shows that the average annual gross rental yield on three-bedroom properties, (annualized gross rent income divided by purchase price) among the 212 counties analyzed is projected to be 7.5 percent in 2023. That is up from an average of 6.7 percent in 2022 in those same markets and marked the first time since at least 2019 that the figure rose across the country.
The single-family rental yield is increasing from 2022 to 2023 in 91 percent of those counties, after declining from 2021 to 2022 in 72 percent of them.
With rental yields on the rise, rents are increasing faster than home prices across most of the country. From 2022 to 2023, three-bedroom rents rose more than single-family home prices in 192, or 91 percent, of the markets analyzed. Rents commonly have risen by around 5 percent to 20 percent over the past year, while changes in home values have typically ranged from a 5 percent loss to a 5 percent gain.
“The broader housing market didn’t fare nearly as well in 2022 as it did in 2021. Prices finally hit the wall, at least temporarily. But that appears to be benefitting the growing number of investors around the U.S. who rent out single-family properties,” said Rob Barber, chief executive officer at ATTOM. “Rents for single-family homes are growing while prices have flattened out, which has helped boost yields for landlords for the first time in at least several years.”
The improving scenario for single-family landlords has come following a year in which the U.S. housing-market changed course. The nation’s 11-year price runup abruptly stalled as home-mortgage rates doubled to near 7 percent, consumer price inflation remained at 40-year highs and the stock market fell. All those factors cut into what prospective home buyers could afford, helping to lower the nationwide home price by 8 percent in the second half of 2022 but allowing rental yields to rise.
Additional price declines “could cut both ways for landlords,” Barber added. “They could raise yields even more but also rekindle super-heated demand for home purchases, away from rentals.”
Top rental returns in Indian River, Collier, Wayne, Mercer and Charlotte counties, as well as other parts of South, Midwest and Northeast regions
Counties with the highest potential annual gross rental yields for 2023 are Indian River County, FL, in the Sebastian-Vero Beach metro area (15 percent); Collier County, FL, in the Naples metro area (14.7 percent); Wayne County, MI, in the Detroit metro area (13 percent); Mercer County, NJ, in the Trenton metro area (12.7 percent) and Charlotte County, FL, in the Punta Gorda metro area (12 percent).
Aside from Wayne County, the highest potential annual gross rental yields in 2023 among counties with a population of at least 1 million are in Cook County (Chicago), IL (11.5 percent); Cuyahoga County (Cleveland), OH (10.1 percent); Oakland County, MI (outside Detroit) (9.1 percent) and Palm Beach County (West Palm Beach), FL (8.5 percent).
Among the top 50 rental returns for counties analyzed in 2023, 29 are in the South, with another 13 in the Midwest and eight in the Northeast. None are in the West.
Rental returns increase in most counties analyzed
Potential annual gross rental yields for 2023 have increased compared to 2022 in 192 of the 212 counties analyzed in the report (91 percent). They are led by Orange County, CA (outside Los Angeles) (yield up 42.7 percent); San Mateo County, CA (outside San Francisco) (up 41.6 percent); Suffolk County (Boston), MA (up 41.2 percent); New Castle County (Wilmington), DE (up 40.5 percent) and San Francisco County, CA (up 38.1 percent).
Aside from Orange County, the biggest increases in potential annual gross rental yields from 2022 to 2023 among counties with a population of at least 1 million are in Miami-Dade County, FL (yield up 34.1 percent); Broward County (Fort Lauderdale), FL (up 32.4 percent); Santa Clara County (San Jose), CA (up 30.1 percent) and Palm Beach County (West Palm Beach), FL (up 29.5 percent).
The only counties with a population of 1 million or more showing decreases in potential gross rental yields from 2022 to 2023 are St. Louis County, MO (yield down 19.8 percent); Nassau County, NY (outside New York City) (down 2.2 percent) and Collin County (Plano), TX (down 0.4 percent).
Lowest rental returns in San Francisco, San Jose, Provo, Honolulu and Washington, D.C., metro areas, along with other western markets
Counties with the lowest potential annual gross returns for 2023 on three-bedroom rentals are Santa Clara County, CA, in the San Jose metro area (3.3 percent); San Mateo County, CA, in the San Francisco metro area (3.7 percent); Utah County, CA, in the Provo metro area (3.8 percent); Honolulu County in the Honolulu, HI, metro area (4.2 percent) and Loudoun County, VA (4.2 percent).
Aside from Santa Clara and Honolulu counties, the lowest potential annual gross rental yields in 2023 among counties with a population of at least 1 million are in Alameda County (Oakland), CA (4.3 percent); Fairfax County, VA (outside Washington, D.C.) (4.3 percent) and Montgomery County, MD (outside Washington, D.C.) (4.5 percent).
Among the bottom 50 potential rental returns for counties analyzed 2023, 34 are in the West and 14 are in the South. The Northeast and the Midwest have just one each.
Rents rising faster than wages in two-thirds of counties measured
Rental amounts are rising faster than wages in 147 of the 212 counties analyzed (69 percent), including Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; San Diego County, CA, and Orange County, CA (outside Los Angeles).
Wages are increasing faster than rents in 65 of the 212 counties analyzed (31 percent), including Maricopa County (Phoenix), AZ; Dallas County, TX; Clark County (Las Vegas), NV; Tarrant County (Fort Worth), TX, and Hillsborough County (Tampa), FL.
Rents rising faster than home prices in 91 percent of nation
Rental amounts are rising faster than home prices in 192 of the 212 counties analyzed (91 percent). They include Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; Maricopa County (Phoenix), AZ, and San Diego County, CA.
Home prices are going up faster than rental amounts in just 20 of the counties analyzed (9 percent), including Nassau County, NY (outside New York City); Collin County (Plano), TX; Pima County (Tucson), AZ; St. Louis County, MO, and Westchester County, NY (outside New York City).
Wages rising faster than prices in more than three-quarters of markets
Wages are increasing faster than home prices in 169 of the 212 counties analyzed (80 percent), including Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; Maricopa County (Phoenix), AZ, and San Diego County, CA.
Home prices are increasing faster than wages in 43 of the counties analyzed (20 percent). They include Collin County (Plano), TX; St. Louis County, MO; Westchester County, NY (outside New York City); Hartford County, CT, and Macomb County, MI (outside Detroit).
Best SFR growth markets include Chicago, Detroit and Cleveland
The report identified 17 “SFR Growth” counties where wages grew over the past year and potential 2023 annual gross rental yields exceed 10 percent.
The 17 SFR Growth markets include Cook County (Chicago), IL; Wayne County (Detroit), MI; Cuyahoga County (Cleveland), OH; Shelby County (Memphis), TN, and New Haven County, CT.
For this report, ATTOM looked at U.S. counties with a population of 100,000 or more and sufficient home price and rental rate data. ATTOM used single-family home price data from its publicly recorded sales deed data, as well as three-bedroom median priced rental data, collected and licensed by ATTOM. The analysis also incorporated second-quarter 2022 average weekly wage data from the Bureau of Labor Statistics (most recent available).