Single-family rental prices grow as renters demand more space
Single-family rent growth of higher-priced single-family homes surpasses 2019 rates while rent growth of lower-priced homes remains below year-ago levels
CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released its latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and across more than 20 metropolitan areas. Data collected for October 2020 shows a national rent increase of 3.1% year over year, up from a 2.9% year-over-year increase in October 2019. This is the first time since the start of the pandemic that national rent prices have outpaced their previous-year growth rate.
Figure 1: National Single-Family Rent Index Year-Over-Year Percent By Price Tier
Despite a slowdown of rental prices this spring and summer, work-from-home needs and a desire for outdoor space increased demand for single-family homes, ensuring a pickup in the pace of single-family rent growth. Similar to the low inventory of homes for purchase, the supply of single-family rentals also declined during the pandemic. Over the summer, the months’ supply of single-family rentals fell by 9%.
“Demand has grown for higher-tier single-family rentals as more people opt to rent larger spaces in less densely populated areas,” said Molly Boesel, principal economist at CoreLogic. “Rent growth of lower-tier rentals still lags behind pre-pandemic rates, which is to be expected in an economy particularly challenging for low-wage earners.”
To gain an accurate view of single-family rental prices, CoreLogic examines four tiers of rental prices. In October 2020, the national single-family rent growth across the four tiers, and the year-over-year changes, were as follows:
Lower-priced (75% or less than the regional median): 3%, down from 3.6% in October 2019, but up from 2.4% in September 2020
Lower-middle priced (75% to 100% of the regional median): 3%, unchanged from October 2019
Higher-middle priced (100% to 125% of the regional median): 3.2%, up from 2.6% in October 2019
Higher-priced (125% or more than the regional median): 3.1%, up from 2.7% in October 2019
Table 1: Single-Family Rent Change for Select Geographical Areas
Among the 20 metro areas shown in Table 1, and for 23 consecutive months, Phoenix had the highest year-over-year increase in single-family rents in October 2020 at 8.9%, which is also up from the September 2020 annual increase of 6.9%. Tucson, Arizona, had the second-highest rent price growth in October 2020 with a gain of 7.6%, followed by Charlotte, North Carolina, at 5.2%. In Las Vegas —which has been hard hit by the decline in tourism — the local market has maintained higher-than-average rent growth due to renters moving to more affordable markets from expensive and densely populated areas like Los Angeles. Conversely, Boston posted an annual decline in rent prices of 4.1%. The drop could be attributed to a trend toward consolidating households, with many renters opting to live with family or friends as they navigate through the pandemic.
Figure 2: Single-Family Rent Index Year-Over-Year Percent Change in 20 Markets
While the rental market continues towards stabilization, unemployment rates remain elevated across the country, with some regions and metros experiencing higher rates of job loss than others — creating downward pressure on rent prices. For example, Honolulu posted an employment decrease of 15.4%, compared to October 2019, which has contributed to a 0.4% decline in single-family rent prices. Hawaii began lifting travel restrictions in mid-October; however, tourism has yet to rebound. As the economy slowly recovers from the impact of the pandemic and contends with the resurgence of coronavirus cases, we may see continued fluctuation of rent prices in metros across the nation.
Methodology
The single-family rental market accounts for half of the rental housing stock, yet unlike the multifamily market, which has many different sources of rent data, there are minimal quality adjusted single-family rent transaction data. The CoreLogic Single-Family Rent Index (SFRI) serves to fill that void by applying a repeat pairing methodology to single-family rental listing data in the Multiple Listing Service. CoreLogic constructed the SFRI for over 80 metropolitan areas — including 45 metros with four value tiers — and a national composite index.
The CoreLogic Single-Family Rent Index analyzes data across four price tiers: Lower-priced, which represent rentals with prices 75% or below the regional median; lower-middle, 75% to 100% of the regional median; higher-middle, 100%-125% of the regional median; and higher-priced, 125% or more above the regional median.
Median rent price data is produced monthly by CoreLogic RentalTrends. RentalTrends is built on a database of more than 11 million rental properties (over 75% of all U.S. individual owned rental properties) and covers all 50 states and 17,500 ZIP codes.
Source: CoreLogic
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