SOURCE: ATTOM Data Solutions

ATTOM Data Solutions

October 20, 2016 00:01 ET

Single Family Rental Returns Drop to Nine-Year Low in 2016 as Institutional Investor Purchases Rise in 68 Percent of Markets

Institutional Investor Purchase Activity Up Nationwide Following Two Years of Decreases; Best SFR Opportunities Identified for Five Local Market Profiles: Low Vacancy, Wage Growth, Low Owner-Occupancy, Millennial Meccas, Low Competition

IRVINE, CA--(Marketwired - October 20, 2016) - ATTOM Data Solutions, the nation's leading source for comprehensive housing data and the new parent company of RealtyTrac, today released its Q3 2016 Single Family Rental Market Report, which found that average single family rental returns dropped to a nine-year low for homes purchased so far in 2016 among 473 U.S. counties analyzed for the report.

The average annual gross rental yield -- monthly rent, annualized, divided by median home price -- among the 473 counties was 8.7 percent for properties purchased in the first seven months of 2016, down from an average of 8.8 percent for the same time period in 2015 to the lowest level since 2007, when the average gross rental yield across the 473 counties was 7.3 percent.

Counties included in the analysis all have a population of at least 100,000 and sufficient rental and home price data. Rental data was from the U.S. Department of Housing and Urban Development, and home price data was from publicly recorded sales deed data collected and licensed by ATTOM Data Solutions (see full methodology below).

View interactive map displaying SFR returns in all 473 counties analyzed.

"While average rental returns on properties purchased so far in 2016 are at a nine-year low, these returns are still attractive compared to alternative investing opportunities," said Daren Blomquist, senior vice president at ATTOM Data Solutions. "After a drop-off in single family purchases by both individual and institutional investors over the past two years, we're starting to see investor acquisition activity pick up again. Given shifting attitudes toward homeownership that are showing up in stubbornly low homeownership rates and our data showing more than 18 million non-owner occupied single family homes -- one in every four single family homes -- these single family rental investors will be an important and likely growing force in the real estate market for years to come."

Institutional investor purchase share increases in 68 percent of markets

Nationwide, 2.7 percent of all single family homes that sold in the first seven months of 2016 were purchased by institutional investors -- entities purchasing at least 10 properties in a calendar year. That was up 29 percent from a 2.1 percent share in the first seven months of 2015 and followed two consecutive years of declines. Over the last 10 years, the peak in institutional investor share of single family purchases nationwide was 8.4 percent in the first seven months of 2008.

"The single family rental operations have been proven in a public market. These homes can be managed like apartments. When we first got started, we thought we could do that, but in the last year or so investors are really starting to believe it," said Gary Beasley, CEO and co-founder at Roofstock, an online marketplace for performing, tenant-occupied single family rental homes. "You've seen a couple of the public companies ramp back up on buying along with other institutional investors who have been on the sidelines who now want to get involved."

Among the 473 counties analyzed for the report, 322 counties (68 percent) posted year-over-year increases in share of institutional investor purchases, including Philadelphia County, Pennsylvania (up 72 percent); Cuyahoga County (Cleveland), Ohio (up 45 percent); Orange County (Orlando), Florida (up 25 percent); Franklin County (Columbus), Ohio (up 28 percent); and Saint Louis County, Missouri (up 93 percent).

"The more desirable homes close to job centers in the Seattle metro are trading for a substantial premium and this impacts rental rate yield as the home values are disproportionately high," said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market, where the institutional investor share of single family home purchases decreased in both Pierce and King counties from a year ago but increased in Snohomish County. "Because of this, we are seeing a slowdown in sales to investors who are looking to rent the homes out. Additionally, the number of 'distressed' or foreclosed homes in the area has diminished rapidly and there are far fewer 'deals' in the Seattle market."

View interactive heat map displaying institutional investor activity in 473 counties analyzed.

Georgia counties account for seven of top 10 for institutional investor share

Richmond County, Georgia, in the Augusta-Richmond metropolitan statistical area that borders South Carolina had the highest share of institutional investor single family purchases in the first seven months of 2016: 13.8 percent.

Six other Georgia counties followed: Muscogee in the Columbus metro area that borders Alabama (13.3 percent); along with five Atlanta-area counties: Henry (13.2 percent); Douglas (13.0 percent); Newton (12.0 percent); Clayton (11.9 percent); and Paulding (11.3 percent).

Rounding out the top 10 for institutional investor share of single family purchases were Jefferson County (Birmingham), Alabama (10.7 percent); Montgomery County, Alabama (9.8 percent); and Bell County, Texas in the Killeen-Temple metro area (8.8 percent).

Other metro areas with counties in the top 20 for institutional investor share of single family purchases in the first seven months of 2016 included Memphis, Tennessee; Salisbury, Maryland; Charlotte, North Carolina; Saint Louis, Missouri; Jacksonville, North Carolina; El Paso, Texas; and Columbia, South Carolina.

Counties in Atlanta, Baltimore, Detroit post highest SFR returns

Counties with the highest annual gross rental yields for single family homes purchased in the first seven months of 2016 were Clayton County, Georgia in the Atlanta metro area (24.3 percent); Baltimore City, Maryland (22.8 percent); Wayne County, Michigan in the Detroit metro area (18.5 percent); Bibb County, Georgia in the Macon metro area (17.7 percent); and Bay County, Michigan in the Bay City metro area (17.6 percent).

Other metro areas with counties in the top 20 for highest rental returns included Ogdensburg-Massena, New York; Racine, Wisconsin; Saginaw, Michigan; Muskegon, Michigan; and East Stroudsburg, Pennsylvania

Best SFR opportunities identified for five local market profiles

The report also identified the best counties for single family rental investing for five different market profiles based on investor preference and appetite for risk: low vacancy rate markets; wage growth markets; low owner-occupancy markets; millennial mecca markets; and low competition markets.

Click on the links below for interactive visuals for each market profile.

  1. 22 best SFR markets with low vacancy rates
  2. 19 best SFR markets with wage growth
  3. 18 best SFR markets with low owner-occupancy rates
  4. 17 best SFR markets that are millennial meccas
  5. 18 best SFR markets with low competition from institutional investors (hidden gems)

Methodology

For this report, ATTOM Data Solutions looked at all U.S. counties with a population of 100,000 or more and with sufficient home price and rental rate data. Rental returns were calculated using annual gross rental yields: the 2016 50th percentile rent estimates for three-bedroom homes in each county from the U.S. Department of Housing and Urban Development (HUD), annualized, and divided by the median sales price of residential properties in each county.

ATTOM also incorporated weekly wage data from the Bureau of Labor Statistics and demographic data from the U.S. Census into the report.

The millennial generation was defined as someone who was born between the years 1979 to 1993.

Report License

The RealtyTrac U.S. Single Family Rental Market Report is the result of a proprietary evaluation of information compiled by RealtyTrac; the report and any of the information in whole or in part can only be quoted, copied, published, re-published, distributed and/or re-distributed or used in any manner if the user specifically references RealtyTrac as the source for said report and/or any of the information set forth within the report.

Data Licensing and Custom Report Order

Investors, businesses and government institutions can contact ATTOM Data Solutions to license bulk foreclosure and neighborhood data or purchase customized reports. For more information please contact our Data Licensing Department at 800.462.5193 or datasales@attomdata.com.

About ATTOM Data Solutions

ATTOM Data Solutions is the curator of the ATTOM Data Warehouse, a multi-sourced national property database that aggregates property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, health hazards, neighborhood characteristics and other property characteristic data for more than 150 million U.S. properties. The ATTOM Data Warehouse delivers actionable data to businesses, consumers, government agencies, universities, policymakers and the media in multiple ways, including bulk file licenses, APIs and customized reports.

ATTOM Data Solutions also powers consumer websites designed to promote real estate transparency: RealtyTrac.com is a property search and research portal for foreclosures and other off-market properties; Homefacts.com is a neighborhood research portal providing hyperlocal risks and amenities information; HomeDisclosure.com produces detailed property pre-diligence reports.

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