ATTOM’s Q1 2023 Single-Family Rental Market report lists 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.
According to the report, 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% in 2023, up from an average of 6.7% in 2022, marking the first time since at least 2019 that the figure has risen across the country. The single-family rental yield is increasing from 2022 to 2023 in 91% of those counties after declining from 2021 to 2022 in 72% of them. With rental yields on the rise, rents are increasing faster than home prices across most of the country.
The report shows that from 2022 to 2023, three-bedroom rents rose more than single-family home prices in 192, or 91%, of the markets analyzed. Rents have risen by around 5% to 20% over the past year, while changes in home values have typically ranged from a 5% loss to a 5% gain.
The top five counties with the highest potential annual gross rental yields for 2023 are Indian River County, FL, in the Sebastian-Vero Beach metro area (15%); Collier County, FL, in the Naples metro area (14.7%); Wayne County, MI, in the Detroit metro area (13%); Mercer County, NJ, in the Trenton metro area (12.7%) and Charlotte County, FL, in the Punta Gorda metro area (12%). 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.
The report also reveals that 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 nearly 7%, 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% in the second half of 2022 but allowing rental yields to rise. Additional price declines “could cut both ways for landlords,” according to Rob Barber, CEO at ATTOM. “They could raise yields even more but also rekindle super-heated demand for home purchases, away from rentals.”
The report highlights the counties with the lowest rental returns, which include San Francisco, San Jose, Provo, Honolulu, and Washington, D.C., metro areas, among others. The only counties with a population of 1 million or more that are showing decreases in potential gross rental yields from 2022 to 2023 are St. Louis County, MO (yield down 19.8%); Nassau County, NY (outside New York City) (down 2.2%) and Collin County (Plano), TX (down 0.4%).
In conclusion, the Q1 2023 Single-Family Rental Market report from ATTOM provides valuable insights into the U.S. rental property market, highlighting the top markets for buying single-family rental properties in 2023. The report’s findings reveal that rental yields are on the rise, with rents increasing.
To learn more and access more detailed data or get the data behind the stories, contact one of ATTOM’s data experts.