Single-Family Rent Growth Increases
Rents for U.S. single-family rental assets increased 2.9 percent year-over-year in April, up from 2.6 percent a year ago, reported CoreLogic, Irvine, Calif.
Rent prices increased significantly across the country in April, with the southwest region showing the highest growth rates, said CoreLogic Principal Economist Molly Boesel. “National employment growth has remained steady in 2018, which could be a driver of continued rent increases.”
Low rental home inventory relative to demand for them fuels the growth of single-family rent prices, Boesel noted. CoreLogic’s Single-Family Rent Index indicated single-family asset rent prices climbed between 2010 and 2018, but year-over-year rent price increases have slowed since February 2016, when they peaked at 4.2 percent. SFR rent growth has stabilized over the last year at a 2.7 percent monthly average.
Morningstar Credit Ratings LLC, New York, found the average vacancy rate in rental homes increased in May for the first time in seven months, inching up to 4.2 percent from 4.0 percent in April. “The increase in vacancy was likely due to a corresponding increase in lease expirations following a seasonal trend of higher lease expirations and vacancies in the spring and summer months,” Morningstar’s Single-Family Rental Research Performance Summary said. The average retention rate for expiring leases declined 50 basis points but remained strong at 79.5 percent as of April.
Among large metros, the Sarasota-Bradenton-Venice, Fla. area had the highest SFR vacancy rate at 6.5 percent, followed by Fort Lauderdale, Fla. with 6.0 percent, Morningstar reported. The Phoenix area continued to experience the highest rent growth, 6.4 percent, and both Las Vegas and Los Angeles metros experienced also 6-plus percent rent growth.
The overall turnover rate decreased slightly to 2.7 percent in April from 2.9 percent in March, Morningstar said.
High-end single-family rental properties–those with rent prices greater than 125 percent of a region’s median rent–dampened the national rent growth rate in April, CoreLogic reported. These high-end rentals saw rent increases of 2.7 percent year-over-year in April compared to 4.2 percent for SFR properties with rent prices below 75 percent of the regional median.
Metros with limited new construction, low rental vacancies and strong local economies that attract new employees had stronger rent growth, CoreLogic said. Both Orlando and Phoenix experienced high year-over-year rent growth, driven by employment growth of 3.2 percent and 2.8 percent year-over-year respectively compared with 1.6 percent employment growth nationally. Chicago experienced the lowest employment growth of the 20 metros the data firm analyzed, “which could be a factor in its low rent growth of 1.0 percent,” the report said.
