US Housing

In the first quarter of 2022, the study analysed single-family rental yields in 212 U.S. counties with populations of at least 100,000 and adequate rental and property price data. Rental and house pricing data was gathered from ATTOM’s worldwide property database, including licenced, publicly recorded sales deed data.

Average gross rental yields before expenses for single-family houses with three bedrooms purchased by landlords this year are declining in 72% of the counties covered by the survey. (The most recent yields are based on the annualised gross rental revenue for 2022 divided by the median purchase price for the first quarter of 2023).

Based on rental yields in 2021, most losses are less than one percentage point. In the first quarter of 2022, however, rental yields were declining in around three-quarters of the cities where the median property price surpassed $250,000. Furthermore, the paper demonstrates that these markets frequently have lower profit margins and yields that fall below 7%.

Two-thirds of areas where houses generally sell for less than $250,000, mostly in the Midwest and South, are seeing declining gross returns. Despite the decreases, returns in more than half of these counties remain above 8%.

The decline in single-family rental yields is because the prices landlords must pay to purchase houses are increasing faster than rents. The median price of a three-bedroom home increased by at least 15% in half of the counties studied between 2021 and 2022, but average rents increased by only a third of that amount.

Last year was the latest in a decade-long housing bubble, as a flood of homebuyers continued to chase a record low housing supply. Buyers continued to flood the market at a time when home mortgage rates were below 3% and many families sought to trade the crowded neighbourhoods most vulnerable to the ongoing coronavirus epidemic for the larger spaces provided by single-family houses and yards.