SAN FRANCISCO, July 11, 2017 – HouseCanary Inc., the leading modern data analytics company for real estate professionals, today announced the release of second quarter data for its HouseCanary Rental Investment Index (HCRI Index), allowing single-family rental home investors, lenders, and renters to benchmark the health of the single-family for-lease market by individual state, ZIP code and block.
Nationwide, the U.S. single-family rental market maintained strong Effective Gross Yields, averaging 8.0 percent nationwide despite home prices continuing their steady climb over the past quarter.
Notable this quarter is not just variance in yields between U.S. regions and Metropolitan Statistical Areas (MSAs) – but within individual MSAs. In St. Louis, for example, top ZIP codes generate 29.3% Effective Gross Yield, while the lowest generate only 4.9% yield. This incongruence in yields points to the cyclical variation across the country, with some markets deep into cap rate compression, and other markets still experiencing yield expansion.
Historically, data in the single-family rental market has been highly splintered, creating an array of barriers to entry for most investors, especially those looking to invest remotely or at scale. HouseCanary’s Rental Investment Index can alleviate those barriers by allowing single-family rental home investors, lenders, and renters to survey a wide breadth of markets across the United States with confidence in the most accurate home values and rental values available.
“The notion that an investor sitting in Chicago can now easily pinpoint a viable property in Kansas City without ever leaving their desk is a complete game changer for this asset class,” explains Dave Garland, a prominent single-family rental investor and Partner at Second Century Ventures. “The ability to know where to invest with this level of granularity has never been possible before, and it is going to revolutionize this market.”
HouseCanary's vast, granular dataset of rent and home values enables the company to compute Effective Gross Yield at the national, state, and ZIP code level, and for 3 million census blocks across the country.
The HCRI Index measures Effective Gross Yield for the industry, computed as the current fair market annualized rent minus estimated property tax, divided by the current fair market home value. Effective Gross Yield is an important profitability metric for single-family rental home lenders and investors, who have historically only been able to calculate gross yields for individual properties or their own portfolio of properties.
Effective Gross Yield by State
A state-by-state look at Effective Gross Yields highlights the continued fragmentation in the national real estate cycle, with effective yields in New England and on the West Coast suppressed by rising home values and far outpaced by effective yields in the Midwest. Despite this, effective yields on the coasts did grow slightly over the second quarter, bucking expectations that home price appreciation would outpace rent growth over this period (though it still may over the long term).
Median Effective Gross Yield by State
In the Midwest and the South, high effective yields only grew further, led by Mississippi, Indiana, and Ohio. All three eclipsed 12.0 percent effective yields on average, higher than any state last quarter, led by Mississippi at 12.9 percent. The two regions are still the top performers nationwide. The lake states have not quite reached the high average yields seen in the Midwest and South, but are still comfortably above most coastal states.
Effective Gross Yield by Metropolitan Statistical Area (MSA)
Of the top 50 MSAs in the country, 28 surpassed the nationwide average Effective Gross Yield of 8 percent this quarter. Rochester, the national leader in Effective Gross Yield, outpaced the runner up by 320 basis points, and more than doubled the national average. Unsurprisingly, the bottom of the list is flooded with MSAs from California, where the growth in housing prices has consistently outpaced growth in rents.
HouseCanary’s data analytics group has indexed, normalized, and analyzed 40 years of U.S. residential property data, spanning over 1 billion transactions and 100s of macroeconomic and local data points, to derive an accurate view of current home values and rental values nationally. The single-family, non-owner-occupied portion of these home and rental values is used to derive the Effective Gross Yield discussed in this document. Effective Gross Yield is defined as the current fair market annualized rent minus estimated property tax, divided by the current fair market home value. Effective Gross Yield can be computed for individual homes, U.S. census blocks, zip codes, states, and the national level. Homeowner association (HOA) fees and insurance costs are not included, as investors are able to add those costs at an individual portfolio level.
Founded in 2014, HouseCanary’s mission is to help people make better real estate decisions. Built on a foundation of great data, powerful models, and predictive analytics, the HouseCanary platform aggregates millions of data elements, including more than four decades of property data and a rapidly expanding arsenal of proprietary calculations and analytics, to accurately define and forecast values and market influences. HouseCanary is financed by notable investors including Hillspire (Alphabet Executive Chairman Eric Schmidt’s family office), Alpha Edison, ECA Ventures, Raven Ventures and others top Silicon Valley investors. The company is headquartered in San Francisco. Visit the company's website www.housecanary.com.
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