In a time when it seems like housing prices are being pushed up daily, rent prices are now experiencing a similar rise as strong gains in employment and income, as well as fierce competition for existing housing, are pushing single-family rental prices skyward.
According to a new intelligence report from CoreLogic, U.S. single-family rent growth increased 10.2% in September 2021, the fastest year-over-year increase in over 16 years, according to its Single-Family Rent Index (SFRI). The SFRI measures rent changes among single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time.
The increase in rent was nearly four times the increase seen in September 2020 (2.6%) on a year-over-year basis and is running well above pre-pandemic levels when compared with 2019.
According to CoreLogic Principal Economist Molly Boesel, consumers continue to feel the ebb and flow of the rental and purchase markets but they still overwhelmingly believe that homeownership is a sound choice (93%). This is true even as current conditions in the competitive purchase market are pushing more buyers not into homes, but into rentals, because they offer more financial flexibility.
“Single-family rental vacancy rates remained near 25-year lows in the third quarter of 2021, pushing annual rent growth to double digits in September,” Boesel said. “Rent growth should continue to be robust in the near term, especially as the labor market improves and the demand for larger homes continues.”
To study rent prices, CoreLogic groups all rentals into four categories: lower-priced, lower-middle priced, higher-middle priced, and higher-priced.
Rentals across the board increased year-over-year in September with the lower-priced category rising 8.3%, lower-middle priced rose 9.3%, higher-middle priced rentals rose by 10.5%, while the highest of all rentals increased by 11%.
“Among the 20 metro areas, Miami had the highest year-over-year increase in single-family rents in September 2021 at 25.7%, followed by Phoenix and Las Vegas at 19.8% and 15.9% respectively,” Boesel wrote in the report. “These major metros have continued to experience rapid growth as tourism returns and local labor markets improve. While Boston (4%) logged the second lowest rent price gain, September marked the second consecutive month that the market has seen an increase in single-family rents after 14 months of declines.”
“Strong job and income growth, as well as fierce competition for for-sale housing, is fueling demand for single-family rentals,” Boesel concluded. “In addition, single-family rental vacancy rates remained near 25-year lows in the third quarter of 2021, pushing annual rent growth to double-digits in September. Rent growth should continue to be robust in the near term, especially as the labor market continues to improve.”
Click here to see a copy of the full report, including interactive data for the top-20 rental markets.