Strong Employment Growth Driving Single-Family Rental Price Increases

Rent prices in single-family rental properties increased 3.2 percent year-over-year in September, up from 2.7 percent a year before, reported CoreLogic, Irvine, Calif.

“We’ve seen a slight uptick in rent prices over the past few months as strong employment growth continues,” said CoreLogic Principal Economist Molly Boesel. “The strength stems from the low-to-middle price tier, which has seen monthly average growth of 3.2 percent since January.”

Boesel noted low rental home inventory relative to demand is fueling growth in single-family rent prices.

Rent prices of lower-end SFR assets, defined as properties with rent prices below 75 percent of the regional median, increased 3.9 percent year-over-year in September. Meanwhile, rents in SFR properties with rents exceeding 125 percent of the regional median increased just 2.8 percent.

Though CoreLogic’s Single-Family Rent Index found SFR asset rents have climbed since 2010, year-over-year rent increases have slowed since peaking at 4.2 percent in February 2016 and stabilized over the last year at a 2.9 percent monthly average.

Phoenix saw the highest year-over-year increase in single-family rents among large metro areas in September at 6.6 percent, outpacing both Las Vegas and Orlando, Fla. for the first time this year. Las Vegas experienced the second-highest rent prices at 6.2 percent growth year-over-year, followed by Orlando at 6 percent, CoreLogic said.

Honolulu saw the lowest rent price increase in September at 0.3 percent. “However, rent prices have continued to rise in Honolulu since May when the metro experienced its first rent price increase following seven months of decline,” CoreLogic said.

Morningstar Credit Ratings LLC, New York, said the average vacancy rate for single-family rental assets increased 60 basis points to 5.0 percent in September, the fifth consecutive month of flat or increasing vacancy rates. “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 Surveillance Analysis report said.

The average retention rate for expiring leases declined 60 basis points to 77.8 percent in August, the latest month available, but has remained over 75 percent for the last year, Morningstar reported.