Single-Family Rent Growth Increases Slightly

CoreLogic, Irvine, Calif., said rent prices in single-family rental properties increased 3 percent year-over-year in September, up slightly.

“Low rental supply coupled with ongoing demand pushed up rents in September,” said CoreLogic Principal Economist Molly Boesel. She noted vacancy rates have fallen “moderately” on the national level over the last quarter with a 0.3 percent decrease in third-quarter 2019 compared to a year earlier and more significantly in some metro areas. Of the metros analyzed in the CoreLogic Single-Family Rent Index, Phoenix experienced the largest decrease in vacancy rates, which helped drive its rent growth to the top of the nation in September.

CoreLogic said single-family rent prices have climbed between 2010 and 2019, but overall year-over-year rent price increases have slowed since February 2016, when they peaked at a 4 percent growth rate. Rent prices have stabilized in the 3 percent range since early 2019, the report said.

September marked the 65th consecutive month in which low-end rentals propped up national rent growth, CoreLogic reported. Rent prices in properties with rent prices below 75 percent of the regional median increased 3.8 percent year-over-year in September. Meanwhile, high-end rentals with rent prices exceeding 125 percent of a region’s median rent increased just 2.9 percent.

Chandan Economics and Arbor said build-to-rent strategies have emerged as the SFR sector’s solution to growing demand. Their joint Single-Family Rental Investment Trends report said cap rates held steady through the summer and remained near their lowest levels since the Global Financial Crisis.

“As younger households grapple with the ongoing student debt crisis and the high cost of starter homes, SFRs have provided an attractive alternative to homeownership, keeping the prospect of a suburban lifestyle attainable,” the report said. “Of course, it is not just millennials who are weighing the positive tradeoffs of SFRs. Homeownership rates for householders between the ages of 35 and 44 are the furthest below their pre-recession highs compared to all other age groups.”

The report said a lack of accessibility to homeownership and growing options across the U.S. housing stock have made renting more attractive. “All else being equal, the SFR market continues to benefit from demand growth, institutional consolidation and economies of scale–all of which should buoy the sector’s performance even if the economy begins to slow,” it said.