Rental returns on Sullivan and Washington County single-family homes decreased during the first quarter of this year. The situation was the same in more than half of the 389 counties tracked by ATTOM Data Solutions’ Single-Family Rental Market Report.
The annual gross yield in Sullivan Co. is still above the national average, while Washington Co. returns were 1.1% under the national norm. On average, the annual gross rental yield was 8.4% in the first quarter.
The most current Sullivan Co. annual gross rental yield is 8.9%, down from 9.1% last year.
The Washington Co. yield was 7.3%, down from 7.8% last year.
While gross yields are down, it doesn’t mean the local rental market is tanking. In fact, local landlords and investors see their market as a strong one. Some expect it to continue growing. But it may not be quite as profitable as it has been during the go-go years.
“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 the majority of the country,” says 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 opposite is the case in Sullivan Co. Its annual gross yield tied for second place in the state with Montgomery Co. But the Sullivan rent for the three-bedroom benchmark is over $300 a month less than it is in Montgomery Co.
Sullivan and Washington were the only state markets with rents on three-bedroom rentals less than $1,000 a month. Sullivan was $961, and Washington was $928. If you think that’s too low, the last paragraph explains the analysis’ methodology. And yes, there are ample examples of three-bedroom rentals going for well over $1,000 a month.
The average rent increases this year was $3 a month in Sullivan and $8 a month in Washington.
Eleven Tennessee counties were in the Q1 analysis. Sullivan Co. tied for second for the highest gross yield. Washington Co. ranked 8th.
The top state market was Shelby Co. with a 12.9% gross yield. It’s also the market with the lowest median sales price for a rental home – $119,900.
Williamson Co. ranked at the bottom of the state list with a 3.9% gross yield. It’s the market with the highest median sales price – $442,750.
The reason local counties had high gross yields but lower rents is the lower median sales price investors paid for single-family homes, and both counties had negative annualized year-over-year wage growth.
The study also reaffirmed that rents have increased faster than home prices and that home prices have increased faster than wages in both counties. That situation also existed in Bradley and Rutherford counties. In the other eight state counties wages increased faster.
Data from an earlier ATTOM report found Washington Co. had the state’s lowest vacancy rate for single-family homes and condo investment properties.
For this report, ATTOM looked at 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 2020 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 single-family homes in each county.
Categories: REAL ESTATE