Single-Family Rental Market Continues to Stabilize

Morningstar Credit Ratings, New York, said lease expirations across single-borrower, single-family rental securitizations declined to 5.2% in November while the average retention rate of expiring leases improved to 79.3%.

The company’s monthly performance report said securitizations improved from 6.5% in October. It also reported the average vacancy rate improved slightly, declining to 5.6% in November from 5.9% in October.

Morningstar Managing Director Brian Grow said the declines reflect seasonal trends in the single-family rental space, whereby tenants prefer to remain in their existing housing during the late fall and winter months.

Among top 20 metropolitan statistical areas, Houston continued to show the highest vacancy rate, though it did decline after six consecutive months of increases, to 9.4% in November from 10.0% in October. Rents in Houston dipped for the third consecutive month, declining by 0.6% in November after declines of 0.8% and 0.4% in September and October.

“The rent declines could be in response to the increase in vacancy rates Houston has experienced as the market adjusts,” Grow said. “Hurricane Harvey may have partially contributed to the Houston rise in vacancies and decline in rents, but the rise in vacancies started before the hurricane hit. According to single-family issuers, mortgage loan servicers, and loan originators, the damage from Hurricane Irma was mostly limited to ‘landscaping’ issues.

The Nashville, Tenn. vacancy rate increased to 8.0% from 7.6% in October keeping it second highest.