SAN FRANCISCO, October 19, 2017 — HouseCanary Inc., the leading modern data analytics company for real estate professionals, today announced the release of third-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.
The nationwide Effective Gross Yield (EGY) for U.S. single-family rentals held steady at 8.0 percent, sustaining a healthy yield in spite of the continued rise in housing prices.
“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,” noted Alex Villacorta, PhD., HouseCanary’s Executive Vice President of Analytics. “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 3 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 added. “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.”
Median Effective Gross Yield (EGY) for rentals by state.
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, New York, 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.
HouseCanary's vast granular dataset of rent and home values enables the company to compute EGY at the national, state, and ZIP code level, and for 3 million census blocks across the country. The HouseCanary Rental Investment Index helps investors avoid the challenges traditionally presented by fractured information in the single-family rental sector. By providing the market with a uniform, centralized index of rental yields, HouseCanary is making it easier than ever for investors to amass large-scale SFR profiles remotely and with confidence.
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 for their own portfolio of properties.
See the current version of the report, along with more granular insights on state and MSA levels.
HouseCanary's data analytics group has indexed, normalized, and analyzed 40 years of US 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 2013, 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), PSP Growth/PSP Capital (firm founded by entrepreneur and former Commerce Secretary Penny Pritzker), Alpha Edison, ECA Ventures, Raven Ventures and others top Silicon Valley investors. The company is headquartered in San Francisco. Learn more: www.housecanary.com.