Key Highlights

  • Best returns in Midwest, worst in West
  • Returns decrease y/y in 87% of counties

ATTOM Data Solutions – Gross Rental Yield Drops

ATTOM Data Solutions Q1 2021 Single Family Rental Market report indicates that in Q1 2021, the average annual gross rental yield on  a median-priced home fell from 8.4% in 2020 to 7.7% for 2021.

This percentage drop was experienced by single-family rental property owners in 87% of the counties ATTOM analyzed for this report.

Mixed Reviews on Declining Rental Yields

According to Maksim Stavinsky, co-founder of Roc360 with companies that specialize in loans to real estate investors nationwide, “Across our platform, rates that we are quoting to borrowers have more than offset the waning cap rates on a y/y basis, with the highest-tier…borrowers seeing terms in the low 4% range.”

At the same time, home prices are rising faster than rents most everywhere. This makes owning a home less affordable and this lessening affordability creates more demand.  In turn, more rental demand usually results in higher rental prices.

According to Todd Teta, ATTOM’schief product officer, said that rising home prices are cutting into profit margins but that, “nevertheless, returns on single-family rentals still generally remain strong and there are pockets, especially in the Midwest, where yields top 10%.”

Counties with Top Rental Returns for 2021

ATTOM identified 25 counties in the Midwest, 15 in the South and 10 counties in the Northeast, as having the most potential for top single-family rental yields.

Look to counties in the Pottsville metro in Pennsylvania, the Macon metro area in Georgia, Baltimore City MD, La Salle County IL, in the Ottawa metro area and the Jamestown metro area of New York.  Also check out counties in Cleveland OH, Fort Worth TX, Columbus OH and San Antonio TX.

Rental Returns Decrease in Nearly 90% of Counties

Counties in and around San Francisco, San Jose, Nashville and Maui metros had the lowest rental returns.  In the bottom 50 counties for rental returns, ATTOM identified 30 counties in the West, 10 counties in the South, seven in the Northeast and 3 in the Midwest.

Wages, Home Prices and  Rent Prices Racing Against Each Other

ATTOM found that wages are rising faster than rents in 77% of single-family rental markets.

Home prices are rising faster than rents in 87% of markets.

Prices are rising faster than wages in 79% of markets.

Best Growth Markets for 202

ATTOM identified 61 “SFR Growth” counties. These counties are seeing average wages growing more than 2020 and that the potential 2021 average gross rental yields are a +10% or better.

Such SFR Growth counties include Milwaukee County, WI; Shelby County (Memphis) TN; Monroe County (Rochester) NY; Jefferson County (Birmingham) AL; and Baltimore City/County  MD.

 

Thanks to ATTOM Data Solutions.

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