Single-Family Rents Were Rising–Before Pandemic
CoreLogic, Irvine, Calif., said single-family rent prices increased 3.3 percent year-over-year in February, until the U.S. coronavirus pandemic struck with full force in March.
“Single-family rents were on the rise early this year, prior to the COVID-19 outbreak across the country,” said CoreLogic Principal Economist Molly Boesel. “In the coming months, the virus’s impact on the rental market will become more apparent. Uncertainties surrounding job security and shelter-in-place mandates could lessen rental demand in the near term.”
In the longer run, after the economic recovery begins, Boesel said consumers may start to prefer single-family rentals over multifamily options because SFR properties provide more space for at-home offices and more distance from other housing units.
February’s SFR rent increase was higher than the 3 percent increase seen in February 2019 and the highest annual gain since August 2016. “However, as consumers contend with widespread unemployment in the wake of the coronavirus outbreak, there may be a downshift in demand in the medium-term,” CoreLogic’s Single-Family Rent Index said.
CoreLogic said low rental home inventory relative to demand fueled the rent growth. The report showed single-family rent prices have climbed between 2010 and 2020 but year-over-year rent price increases slowed starting in February 2016 and have stabilized in the 3 percent range over the past year.
Lower-priced rentals propped up national rent growth in February, a reliable trend since 2014. But the gap between low- and high-end price gains narrowed in February. Rent prices in lower-end properties with rents below 75 percent of the regional median increased 3.6 percent year-over-year, down from a 4 percent pace a year ago. Higher-priced SFR properties with rents exceeding 125 percent of a region’s median rent increased 3 percent in February, up from a 2.6 percent gain a year ago.
Metros with limited new construction, low rental vacancies and strong local economies to attract new employees have stronger rent growth, CoreLogic said. Phoenix saw the highest year-over-year rent growth in February, driven by 3.2 percent annual employment growth compared with 1.6 percent job growth nationally. Though employment growth remained strong in February, March marked a turning point as the national emergency declaration caused widespread job losses and furloughed employees.
“This has disrupted the typical rental demand and supply dynamic, which will ultimately impact rent growth in the coming months,” CoreLogic said.