Single-Family Rent Growth Hits Sixth Consecutive Record
US single-family rent growth increased 10.9% in October 2021, the fastest year-over-year increase in over 16 years, according to the CoreLogic Single-Family Rent Index (SFRI).
The index measures rent changes among single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time. The October 2021 increase was more than three times the October 2020 increase, and while the index growth slowed last summer, rent growth is running well above pre-pandemic levels when compared with 2019.
The report, released this week, reflected the fastest increase in the history of the SFRI for both the low- and high-price rent tiers.
More Renters ‘Priced Out’ and ‘Stuck In’ Rental Markets
Jeff Andrews, data journalist at Zumper, tells GlobeSt.com that the rapid rent growth in the single-family rental market reflects what’s been a hyper-competitive home sales market since the beginning of the pandemic in March 2020.
“As home valuations continue to soar, more renters get priced out and stuck in the rental market, adding to demand for single-family rentals,” Andrews said. “At the same time, investors have been aggressively acquiring single-family homes for the purpose of renting them out, a trend that began with the financial crisis in 2008. This not only contributes to pushing home valuations up, but also puts single-family homes in the hands of financially savvy operators who know the rental market and will price their units accordingly.”
Pricing is indeed a key component to SFH operators’ success. For instance, Richard Ross, CEO of Quinn Residences, tells GlobeSt.com that it’s essential to keep the resident top of mind when determining rent pricing, especially considering the demographics of young families who eventually want to buy in the build-to-rent single-family housing market. “While we are seeing consistent rent growth in all our communities, rent levels are still well within our affordability guidelines.”
Another consideration for these investors is that consumer demand for single-family homes is becoming a growing preference. For instance, Josh Hartmann, CEO, NexMetro Communities, tells GlobeSt.com that there is an “unmistakable appeal and popularity” for this residential hybrid housing option.
“The considerable growth is a reflection of consumer demand—more and more people are seeking a new home lifestyle and don’t want the typical big box rental options.”
Single-Family Rent Growth by Price Tier
Rent growth accelerated for all price tiers in October, though rents for high-priced rentals showed the highest increase. The low-price tier is defined as properties with rent prices less than 75% of the region’s median rent, and the high-price tier is defined as properties with rent prices greater than 125% of a region’s median rent.
Rent prices for the low-price tier increased 9.5% year over year in October 2021, up from 2.8% in October 2020, according to CoreLogic. Meanwhile, high-price rentals increased 11.4% in October 2021, up from a gain of 3.5% in October 2020.
Differences in rent growth by property type emerged after the pandemic as renters sought out standalone properties in lower density areas.
Detached homes are preferred by would-be homebuyers who have either been priced out of the market or unable to find a home in today’s supply-constrained market, which has pushed rent up for these homes. Annual rent growth for detached rentals was 12.3% in October, compared with 9% for attached rentals.
Miami, Phoenix Top Metro-Level Results
In the year-over-year change in the rental index for 20 large metropolitan areas in October 2021, Miami, with an increase of 29.7%, stood out with the highest year-over-year rent growth in October, followed by Phoenix at 19.3%.
Chicago had the lowest increase at 4.2%, and Boston (+6%) showed significant improvement from a year ago when rents decreased 4.2%. All 20 metros had higher rent growth than a year earlier.