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Sun Belt Single-Family Rental Markets See Largest Rate Increases
Sun Belt cities generally saw the highest single-family rental price growth in the second quarter, reported RentRange, Denver.
RentRange ranked U.S. metros by average rental rate increase for single-family homes and by average rental property gross yield. It found a continuing trend of strong single-family rent growth in Florida, Louisiana and California.
Cape Coral-Fort Myers, Fla., New Orleans-Metairie-Kenner, La., Deltona-Daytona Beach-Ormond Beach, Fla. and Port St. Lucie, Fla. ranked among the top five markets for highest SFR rent growth. Seattle-Tacoma-Bellevue, Wash. represented the only non-Sun Belt market among the top five.
“Rising home values in Florida and California, in particular, are creating hurdles for potential buyers–and, therefore, are continuing to drive a growing single-family rental market featuring strong rent increases and low vacancy rates,” the report said.
RentRange CEO Wally Charnoff noted that house prices continue to appreciate across the U.S. “An increasingly competitive home-buying market bodes well for the single-family rental market relative to both demand and rental rate increases,” he said.
Charnoff said two of the top three highest-performing MSAs by average gross yield–which demonstrates income return from an investment prior to operating costs–are outside of the Sun Belt. Grand Rapids-Wyoming, Mich., moved into the top spot with a 15.6 percent average gross yield while Pittsburgh, Pa., ranked third with a 15.1 percent average gross yield. “This indicates that properties in these markets have a high income generation to home value ratio,” he said.
In a recent examination of single-family rental securitizations, Morningstar, Chicago, found that delinquency rates ticked up to 0.6 percent in July from 0.5 percent the month before.
In June, the most recent data available, retention rates for full-term SFR leases remained in the mid-70 percent range, Morningstar said. But because more leases expire in the summer months, the turnover rate rose, marking a six-month trend.
Morningstar reported that rents for properties backing single-family rental securitizations rose 5.2 percent from their prior contractual rents.