Single-family rental market holds steady during third quarter

HouseCanary has released third-quarter data for its Rental Investment Index (HCRI), which shows continued health in the U.S. single-family rental market. The nationwide effective gross yield (EGY) for U.S. single-family rentals held steady at 8 percent, sustaining a strong yield in spite of the continued rise in housing prices.

“HouseCanary’s latest HCRI results show that the recalibration of home prices to historic norms is continuing to put overall downward pressure on effective gross yields for the single-family rental sector,” noted Alex Villacorta, HouseCanary’s executive vice president of analytics. “In particular, the accelerated growth in the Western and Northeast regions over the past few years has seen the strongest effect of compressing yields as the cost to acquire continues to increase.

Of the top 50 metros, three metros showed positive growth in yields over the last quarter, suggesting that nationwide, the growth of rents is slowing relative to that of home prices.

“Though the most abundant double-digit opportunities reside in the Southern region of the country, there are still several localized pockets of high-yield opportunities in most markets throughout the country,” said Villacorta.

Statewide average yields in the Midwest and South continue to show stark differences, where EGY ranges from 8.3 percent to as high as 12.7 percent, and in the West and New England, no state surpasses 7.0 percent.

California, which has the lowest statewide EGY in the country at 5.1 percent, also contains the four lowest yielding MSAs, each with EGYs between 3.5 percent and 4.8 percent.

There is heavy variation within individual states, too. In Rochester, N.Y., a 13.9 percent EGY is elevating the metro to the highest-yielding individual city in the nation — despite New York managing only a 6.7 percent EGY statewide. It is worth noting that while Rochester maintained the top EGY in the nation, its EGY dropped 3.3 percentage points since last quarter, which may indicate a softening at the top of the market — though no other MSA saw its EGY drop more than 0.7 percentage points since last quarter.

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