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Rising SFR Rents Indicate Healthy Tenant Demand

for-rent-twoDemand for single-family properties is on the rise, according to the latest RMBS Research report [1] released by Morningstar Credit Ratings, LLC [2] earlier this month.

According to the report, which examined around 90,000 single-family rental properties in 100 metropolitan areas, increasing rents on single-family properties throughout the U.S. suggest tenant demand is robust—and staying that way.

“Tenant demand for single-family rental properties remains strong,” the report reads. In fact, Morningstar’s research found that rent on securitized properties has increased 6 percent over the past year. Additionally, in the last 18 months, rents rose on most properties in 23 single-borrower, single-family rental securitizations.

The Morningstar report also found that rent increases from new tenants were more seasonal than those for renewals and that rent changes tend to spike in the summer. Increases on renewal properties tend to fall in the 3.5 to 4.5 percent range, as opposed to the 6-percent jump seen with new tenants.

According to Morningstar, the seasonality of rent increases is likely due to several factors: First, that many renters prefer to move in the summer, when the weather is milder than other times of year. Statistics also show that renters are willing to pay more in rent during the summer if it means moving to a certain school district for their children. In the same vein, renewal renters are often willing to pay more in rent during the fall, if it allows their kids to stay in the same schools.

Rent increases were also higher with institutional owners, who tend to push rent hikes more aggressively than more small-time landlords. As the report puts it, “This is due in part to the institutions having more data, resources, and analytical tools.”

Overall, Morningside found that most metro areas saw single-family rents right on track with RentRange estimates. Several Florida cities, including Fort Launderdale, Miami, Lakeland, and Sarasota-Bradenton-Venice, however, did not follow suit.

Click here [1] to view the complete report.