Rents are up, but COVID-19 may take a toll on the strong housing market sooner or later
Single-family rental returns moderated in the first quarter as rents did not increase as fast as the price growth for investment rental properties, according to ATTOM Data Solutions.
The average annual gross rental yield, or the annualized gross rent income divided by the median purchase price of single-family homes, among 389 counties fell from 8.6% to 8.4% year over year.
“The business of buying single-family homes for rent has lost a little steam this year across the United States as rents aren’t rising quite as fast as prices for investment rental properties in a majority of the country,” said Todd Teta, chief product officer at ATTOM Data Solutions. “But from the national perspective, things are generally holding steady for landlords in the single-family home rental market. Also, profit trends are moving in favor of investors in higher-rent counties and against those in lower-rent regions.”
The latest Yardi Matrix report showed that the national average rent in February 2020 was $1,468, slightly up 3.2% from the same time in 2019.
Despite the increase in rent, the effects of the Coronavirus pandemic may still dampen the robust housing market, according to Doug Ressler, manager of business intelligence at Yardi Matrix.
"The economy still stands to benefit from ultraslow rates. Homeowners are refinancing while renters are seeing normalized rent growth, which reduces their monthly payments and allows them to spend in other areas. We haven’t seen the impact of the COVID-19 pandemic in official data yet, as February employment growth was very strong, jobless claims did not increase, and rent growth continued its steady increase. However, the coming weeks and months will likely come with employment cuts and a slowdown in trade."
Best US markets for buying single-family rental properties in 2020
Baltimore, Md., topped the counties (population of at least 100,000) with the highest annual gross rental yields for 2020 at 28.9%. Cumberland County, N.J. (20.1%), Bibb County, Ga. (18.2%), Mobile County, Ala. (15.7%), and Clayton County, Ga. (15.1%) rounded out the top five.
Baltimore, Cumberland, and Bibb counties also had the highest yields last year.
