Single-Family Rental Prices Rising

Michael Tucker mtucker@mba.org

September 27, 2018


Rents for U.S. single-family rental properties increased 3 percent year-over-year in July, up from a 2.7 percent pace a year ago, reported CoreLogic, Irvine, Calif.

CoreLogic Principal Economist Molly Boesel said low rental home inventory relative to demand is fueling single-family rent growth. Year-over-year rent price increases peaked at 4.1 percent in February 2016 and have stabilized over the last year with a 2.7 percent monthly average.

Morningstar Credit Ratings, New York, said the performance of securitized single-family rental properties continues to follow seasonal trends. "Lease expirations and vacancy rates continue to increase slightly and retention rates declined as families tend to prefer moving in the summer months to avoid disrupting school attendance," Morningstar's August Single-Family Rental Research report said.

Morningstar noted it has not identified any properties included in single-family rental securitizations affected by Hurricane Florence, but said it continues to monitor the situation as the conditions change.

Boesel said single-family rents were quick to respond to the late-summer hurricanes las year, "with increased rental demand showing up in higher rents in just one to two months after the disasters. Similar movements in rents could be seen in metro areas affected by Hurricane Florence in the following months," she said.

The single-family rental market accounts for half of the U.S. rental housing stock; units in multifamily properties make up the other half.

CoreLogic said rent for lower-end assets grew at a faster rate than rent for higher-end properties in July. "High-end rentals continued to dampen national rent growth in July, despite accelerating rates of increase among this tier," the report said. High-end rentals with rent prices greater than 125 percent of a region's median rent saw 2.7 percent rent year-over-year rent increases in July, up from a 1.9 percent gain a year ago. Rent prices among lower-end rentals with rent prices less than 75 percent of the regional median increased 3.9 percent in July.

Among the largest U.S. metros, Orlando, Fla. had the highest year-over-year increase in single-family rental rent prices in July at 6.4 percent year-over-year, outpacing Las Vegas, where rent prices led the nation throughout 2018's first half. Las Vegas experienced the second-highest rent price growth in July at 5.7 percent, followed by Tucson, Ariz. at 4.2 percent. Seattle experienced the lowest SFR rent price increase in July, just 1.1 percent.

"Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth," CoreLogic said.

In August, the Federal Housing Finance Agency anounced Fannie Mae and Freddie Mac would leave the single-family rental market. "What we learned as a result of the pilot [programs] is that the larger single-family rental investor market continues to perform successfully without the liquidity provided by the enterprises," said FHFA Director Mel Watt.

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