Third quarter 2017 data in the HouseCanary Rental Investment Index (HCRI Index) attest to the health of the single-family rental market, with an Effective Gross Yield averaging 8.0 percent nationwide, the company recently announced. The HCRI Index measures Effective Gross Yield (EGY), a profitability metric, at national, state and zip code levels.
There remains a stark difference between the statewide average yields in the Midwest and South, where EGY ranges from 8.3 percent to as high as 12.7 percent, and the West and New England, in which no state surpasses 7.0 percent.
There also remains heavy variation within individual states. While the average EGY in the state of New York is a mere 6.7 percent, Rochester, N.Y., remains the highest-yielding individual city in the nation, at 13.9 percent EGY. It is worth noting that while Rochester maintained the top EGY in the nation, it dropped 3.3 percentage points since last quarter, indicating that there may be a softening at the top of the market. EGYs for all 381 U.S. metropolitan statistical areas (MSAs), as well as for zip codes and blocks within the MSAs, can be accessed on HouseCanary’s website.
“HouseCanary’s latest HCRI Index 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,” says Alex Villacorta, PhD., executive vice president of Analytics for HouseCanary. “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, only three metros have shown positive growth in yields over the last quarter, suggesting that nationwide, the growth of rents is slowing relative to that of home prices,” Villacorta says. “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.”
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