Landlords squeezed by high home prices and little — if any — rent increases
Big home prices and smaller-than-anticipated rent increases have created some hard times for real estate investors nationwide, especially in California.
About 55% of counties nationwide had a decline in the average annual gross rental yield, largely because of near-record prices and stagnant rents, according to ATTOM Data.
Landlords in California, where rents are often among the highest in the nation, are dealing with some of the lowest gross rental yields in the U.S.
“Many landlords have been able to offset higher acquisition costs with rent growth, but returns are tightening in a majority of counties,” said Rob Barber, CEO of ATTOM. “Even though rents and wages are rising in many markets, record-high home prices are compressing yields. Investors will need to be more selective, focusing on markets where rent growth and affordability trends continue to support strong returns.”
INFLATION OUTPACES RENT INCREASES
Like Bakersfield and Fresno. The two cities – among the most affordable large metros in California – had the best gross rental yields at 7% in 2025, more than double the 3.1% in San Jose (see table, below). Worth noting, Bakersfield and Fresno are also the best markets for home-flipping returns in the state.
Some landlords of rental homes, especially those who bought in the past few years, are losing – or making little – money from tenants. Like homebuyers, some tenants are enjoying a rather solid renters’ market, with small, if any, rent increases when they renew leases or move to new homes.
For example, the average rent for a single-family home in Los Angeles increased a modest 2.4% in December, according to Cotality. The figure is better than many cities and double the national average but is basically just keeping up with inflation.
How is gross rental yield determined (math time)?
Annual rent ÷ property price × 100 = gross rental yield
Important to note that mortgage payments and interest, property tax, maintenance and insurance are not part of the equation, which will reduce the overall (or net) yield.
‘AFFORDABILITY PRESSURES REMAIN FRONT OF MIND’
Nationwide, 35 of the 50 largest metros – from Atlanta to Seattle – had smaller rental gains in December compared to a year earlier, and 18 reported declines, according to Cotality.
“Persistently high multifamily vacancy rates are giving rents meaningful leverage, softening rents, even in the single-family segment,” said Molly Boesel, senior principal economist at Cotality.
It’s an about-face from the double-digit rent increases during the first few years of the COVID pandemic, when apartment tenants raced to single-family homes and many people looked for more affordable markets, such as the Central Valley.
“Overall rent growth remains near 15-year lows, yet the high-priced tier continues to track close to its long-run trend, underscoring the K-shaped dynamics shaping today’s housing market,” Boesel said. “Affordability pressures remain front of mind for budget-constrained renters as these conditions persist.”
| City | Median rent for a 3-bedroom home | % change compared to 2024 | Annual gross rental yield |
|---|---|---|---|
| Bakersfield | $2,170 | -1.0% | 7.3% |
| Fresno | $2,302 | +2.0% | 6.99% |
| Los Angeles | $4,438 | -8% | 5.7% |
| Monterey | $4,054 | +1% | 5.6% |
| Orange County | $4,865 | -6% | 4.5% |
| Riverside | $1,872 | -4% | 6.8% |
| Sacramento | $2,586 | No change | 6.1% |
| San Diego | $4,078 | -2% | 4.8% |
| San Francisco | $5,456 | -1% | 4.3% |
| San Jose | $4,401 | +2% | 3.1% |
| San Luis Obispo | $3,707 | +9% | 4.7% |
| Santa Barbara | $3,854 | -36% | 4.8% |
| Santa Rosa | $3,527 | +2% | 5.3% |
| Stockton | $2,532 | +1% | 6.1% |
Source: ATTOM Data
Timing the market: The relisting dance between buyers and sellers
They’re back. Again.
Homes on the market just a few months ago but later removed are returning at a record pace, according to Redfin. More than 45,000 homes were relisted nationwide in January, about 3.6% of the homes on the market, the most in more than a decade.
The on-off-on listings are the latest evidence of a confusing market for owners fishing for the best-possible paydays and buyers looking for lower prices.
Many wanna-be sellers were disappointed with the lower-than-expected sales activity and prices in 2025, prompting the return several weeks or a few months later, according to real estate experts.
‘SOME SELLERS WILL BE MORE FLEXIBLE’
But buyers continue to hold the cards in most markets. More than one of every three (36%) of relisted homes sold at a discount.
“Homebuyers are already scoring discounts because there are more homes for sale than people who want to buy them, and it’s possible those discounts will get bigger if relistings boost supply further,” said Redfin senior economist Asad Khan. “Some sellers will be more flexible on price when they relist since they’ve already been burned once. Buyers shouldn’t be shy about asking for concessions; even if the list price is high on paper, the seller may be open to negotiating.”
But not everywhere. The Bay Area – easily the hottest housing market in the nation, thanks to AI-connected jobs – boasts the most delisted homes returning to the market (see table, below).
A TALE OF TWO MARKETS
Many homeowners looking to sell were advised by brokers to ditch the for-sale sign for several months and return in early 2026. The advice has paid off for many sellers in the Bay Area.
About 12% of homes in the Bay Area were delisted and later returned to the market, often generating higher paydays for sellers, according to recent California Association of Realtors reports. One of every 10 homes in nearby Oakland was relisted in January.
All eight metros in California had more delisted homes returning to the market than the national average, with Riverside’s 4.6% the lowest rate in the state. Many Riverside-area owners earn less than other regions in the state, forcing more to sell and hope for a still-solid payday.
| City | Relistings in January | % of active listings |
|---|---|---|
| Anaheim | 367 | 6.4% |
| Los Angeles | 1,141 | 6.1% |
| Oakland | 421 | 10.2% |
| Riverside | 799 | 4.6% |
| Sacramento | 342 | 6.0% |
| San Diego | 347 | 5.3% |
| San Francisco | 202 | 11.4% |
| San Jose | 257 | 12.5% |
Source: Redfin
As the economy slows, fewer cash deals and smaller down payments
Cash may be king, but it’s less of a thing for buyers – and sellers.
And down payments are smaller, too.
Blame a dismal economy and falling mortgage rates.
All-cash deals accounted for 29% of home sales nationwide in 2025, the lowest percentage since 2020, according to Redfin.
In California, fewer than 22% of homes were bought with cash, an almost 2 percentage point drop compared to a year ago. Not a dramatic decline, but one worth watching.
Six of the eight metro regions experienced a drop in cash deals, including a state-worst 5.8 percentage point drop in Riverside (see table, below). Oakland and San Jose reported 2 percentage point increases in such transactions, according to Redfin.
In general, all-cash deals are preferred by sellers, who may even accept a lower cash offer compared to higher-priced but financed purchases.
But amid an anemic economy, bad job growth and lower mortgage rates, more buyers are looking to finance their next home. Some buyers could be concerned about their financial future, especially as more companies cut their workforces, housing officials say.
| City | Avg. down payment in late ’25 | % change from a year earlier | Down payment as % of home price |
|---|---|---|---|
| Anaheim | $270,800 | -5.0% | 21.4% |
| Los Angeles | $166,000 | -8.1% | 20.0% |
| Oakland | $177,600 | -11.2% | 20% |
| Riverside | $62,000 | -4.6% | 10% |
| Sacramento | $85,000 | -4.3% | 20% |
| San Diego | $153,126 | -9.9% | 20% |
| San Francisco | $400,310 | +4.7% | 25% |
| San Jose | $360,000 | -4.7% | 23.9% |
Source: Redfin
‘SELLERS DON’T HAVE MUCH SAY IN TODAY’S MARKET’
Those factors may also have played a role in smaller down payments in December, the first decline in five months. Of course, as home prices dip, buyers are likely more focused on a down payment based on a percentage of the price rather than a specific amount of money, housing experts say.
All eight metro regions had down payments of at least 20%, which eliminates the need for mortgage insurance. But as prices decline, so have the down payments.
The average down payment dropped 5.4% in California in December, including double-digit declines in Riverside and San Diego (see table, below).
San Francisco beat the trend, with the average buyer plunking down $400,310, a 4.7 percentage point increase. The average down payment of 25% was the largest in the state.
Nationwide, the average down payment dipped to 15.7%, compared to 16.7% a year earlier.
“Down payments may be falling in part because Americans are seeking out more affordable homes due to high prices, elevated mortgage rates and economic uncertainty,” said Redfin principal economist Sheharyar Bokhari. “Sellers typically prefer buyers who make large down payments because it signals financial stability, but sellers don’t have much say in today’s market. Buyers hold the negotiating power because there are more homes for sale than people who want to buy them.”
| City | % of cash buyers in late 2025 | Percentage point change from a year earlier |
|---|---|---|
| Anaheim | 27.0% | -1.5 |
| Los Angeles | 20.8% | -0.2 |
| Oakland | 18.5% | +2.6 |
| Riverside | 24.4% | -5.8 |
| Sacramento | 19.6% | -2.8 |
| San Diego | 20.0% | -2.1 |
| San Francisco | 24.4% | -3.8 |
| San Jose | 20.2% | +2.7 |
Source: Redfin
