Single-Family Rent Prices Grew Faster in 2018
Rent prices in single-family rental properties grew faster in 2018 than in 2017, reported CoreLogic, Irvine, Calif.
CoreLogic Principal Economist Molly Boesel said single-family rents increased 3 percent on average in 2018, up from 2.7 percent in 2017. “The strengthening in rent prices reflects strong economic and labor markets,” she said. “However, low-end rental increases outpaced high-end increases for the fifth consecutive year, suggesting continued supply constraints on the lower end.”
Low rental home inventory relative to demand is fueling single-family rent price growth, the CoreLogic Single-Family Rent Index report said. It noted single-family rent prices climbed between 2010 and 2018. “However, year-over-year rent price increases overall have slowed since February 2016,” the report said. SFR rents peaked at 4.2 percent in early 2016 and have stabilized over the last year at a 3 percent average.
“National rent growth was continuously propped up by low-end rentals throughout 2018 and this trend continued into December,” CoreLogic said. Rent prices among lower-end SFR assets–defined as properties with rent prices below 75 percent of the regional median–increased 3.7 percent year-over-year in December, down from the 3.9 percent increase seen in December 2017. Meanwhile, high-end rentals with rent prices greater than 125 percent of a region’s median rent increased 2.9 percent in December, up from 2.5 percent in December 2017.
Morningstar Credit Ratings, New York, said the average single-family rental vacancy rate increased 10 basis points in December to 4.6 percent from 4.5 percent in November. The average retention rate for expiring leases slipped 110 basis points to 77.7 percent but has remained over 75 percent for the past year.
Following a seasonal trend, lease expirations fell to 4.8 percent in December from 5.3 percent in November. “The decrease in lease expirations is expected to lead to a decline in the vacancy rate in the coming months,” Morningstar’s January Single-Family Rental Research report said.
Phoenix saw the highest year-over-year increase in single-family rents among the top 20 U.S. markets in December at 6.9 percent, followed closely by Las Vegas at 6.8 percent. Orlando experienced the third highest year-over-year rent increase at 5.1 percent, CoreLogic reported.
Metro areas with limited new construction, low rental vacancies and strong local economies tend to have stronger rent growth, CoreLogic said. Orlando and Phoenix saw employment grow 4.8 percent and 4 percent year over year, respectively, compared with a 1.7 percent national employment growth average.
