Landlords purchasing three-bedroom, single-family homes this year are seeing a decline in their gross rental returns before expenses, a new report says Friday.
ATTOM, which curates real estate data nationwide, analyzed single-family home rental yields in 212 U.S. counties with a population of at least 100,000.
The report shows that average gross rental yields before expenses on three-bedroom, single-family homes purchased by landlords this year decreased in 72% of the counties surveyed in the report.
Gross returns are dropping in two-thirds of the markets where homes typically sell for less than $250,000, located in the Midwest and the South.
The downturn in single-family rental yields comes as prices that landlords must pay to buy properties are rising faster than rents. Median prices of three-bedroom houses increased at least 15%, ATTOM reported, between 2021 and 2022 in half of the counties they analyzed while average rents increased by that much in only one-third of those markets.
“Investors who own single-family rental properties have seen their margins compressed over the last year as home prices have risen faster than rental rates,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “The good news for these property owners is that their yields should improve as annual rental rates increase, and they should also benefit from home price appreciation over time.”
The median price of a house, according to the National Association of Realtors, is $391,000, up 14% from a year ago when the price was nearly $341,000.00.
Counties that offered landlords the highest returns on their single-family home rental properties included Collier County (Naples), Fla., Atlantic County (Atlantic City) N.J., Mercer County, Trenton), N.J., Indian River County (Vero Beach) Fla. and Charlotte County, (Punta Gorda), Fla.
Counties offering landlords the smallest returns this year included Santa Clara (San Jose), Calif., San Mateo (Redwood City) Calif., Williamson County (Franklin) Tenn. and Fayette County (Lexington) Ky.
