Single-Family Rent Growth Slips

CoreLogic, Irvine, Calif., said rent prices in single-family rental properties increased 2.9 percent year-over-year in July, down slightly year over year.

Single-family rents increased 3.1 percent in July 2018, CoreLogic said. The single-family rental market accounts for half the nation’s rental housing stock.

CoreLogic Principal Economist Molly Boesel noted rent increases on entry-level properties currently outpace the rest of the SFR market. Properties with rent prices below 75 percent of the regional median increased 3.5 percent year-over-year in July while properties with rent prices exceeding 125 percent of a region’s median rent saw just 2.7 percent year-over-year increases.

“This trend should continue in the near term with strong demand from younger millennials who indicate they prefer to rent rather than own a home,” Boesel said.

CoreLogic said annual growth at the low end of the rental market has “consistently outpaced” that of higher-end properties ever since May 2014. The firm cited a study it conducted with RTi Research that found 63 percent of younger millennials aged between 21 and 29 opted to rent over purchasing a home.

CoreLogic’s Single-Family Rent Index report found single-family rent prices have climbed between 2010 and 2019. “However, overall year-over-year rent price increases have slowed since February 2016 [when they peaked at 4 percent],” the report said. SFR property rent growth has stabilized over the last year at a 3.1 percent monthly average.

Among the 20 largest U.S. metros and for the eighth consecutive month, Phoenix had the highest year-over-year increase in single-family rents in July at 7.2 percent. Tucson, Ariz. and Las Vegas experienced the second- and third-highest rent gains in July at 5.7 percent each, while Miami saw the lowest rent increases of all analyzed metros at 1.2 percent.

“Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth,” CoreLogic said.

Morningstar Credit Ratings, New York, said the SFR sector’s average vacancy rate increased 10 basis points during July to 4.5 percent. The average retention rate for expiring SFR leases decreased 90 basis points in June to 77.1 percent.

Among the 20 largest metros, Denver-Aurora, Colo. and Fort Lauderdale, Fla. had the highest vacancy rates for the third consecutive month at 8.1 percent and 7.1 percent, respectively, Morningstar said. Both measures increased at least 30 basis points from the month before.