Single-Family Rents Make Another Record Leap
By Paul Bergeron | March 16, 2022 at 07:46 AM
Single-family rents continue to set record increases in growth.
Rent growth in this asset class increased 12.6% in January 2022, the fastest year-over-year increase in over 16 years, according to the CoreLogic Single-Family Rent Index (SFRI).
January marked the 10th consecutive month of record-level rent growth. 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.
Annual rent growth in January 2022 was more than triple the gain recorded in January 2021 and more than quadruple the increase from January 2020.
Rent Growth Found in All Tiers
Rent growth continued at a rapid pace for all single-family price tiers in January. 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 12% year over year in January 2022, up from 3% in January 2021. Meanwhile, high-price rentals increased 12.2% in January 2022, up from a gain of 4.5% in January 2021. This was the fastest increase in the history of the SFRI for both the low- and high-price rent tiers.
Detached-Property Growth Leads the Way
Differences in rent growth by property type emerged after the pandemic as renters sought out standalone properties in lower-density areas. Rent growth for detached properties far outpaced that of attached properties for most of 2021.
In recent months rent growth for attached properties has accelerated and the difference in rent growth by property type is now similar to what it was prior to the pandemic. Annual rent growth for detached rentals was 12.4% in January, compared with 12.2% for attached rentals.
Miami Tops Individual Market Growth
Among the 20 metro areas tracked, Miami, with an increase of 38.6%, stood out with the highest year-over-year rent growth in January, followed by Orlando at 19.9%.
Washington, D.C., had the lowest increase at 5.6%, and Boston (+13.7%) showed significant improvement from a year ago when rents decreased 7.8%.
In January, rents increased across the country, with Sun Belt cities once again registering the largest gains. The robust price growth was partially due to a continuing shortage of available rental properties. Also, the cost of purchasing a home rose by 19% on an annual basis in January, shutting out many would-be homeowners and forcing them to keep renting.
Texas Markets Rank High
For example, Shannon Livingston, principal at RREAF Communities, tells GlobeSt.com that the housing supply across several major markets within Texas are at an all-time low. Dallas in particular saw a year-over-year decrease of 53.3% in January 2022. Simultaneously, rents have soared 18.2% helping fuel Dallas’ status as the number one multifamily market in the country.
“These market conditions show no signs of slowing, making new build-to-rent homes a hotbed of activity,” he said.
According to RentCafe, 6,740 build-to-rent homes were completed in the United States last year. Three of Texas’ largest cities rank in the top 20 metros with the most single-family build-to-rent units with thousands more in development.
“On our new master-planned communities, we are receiving two inquiries from build-to-rent groups for every one for-sale builder inquiry,” Livingston said. “It is certainly a component of most large-scale communities being developed today. However, it is critical to have the right ratio of build-to-rent and the right management of that portfolio to support the long-term health of the community.”
Jacque Petroulakis, executive vice president of marketing and investor relations, NexMetro, tells GlobeSt.com that NexMetro continues to see robust rental rates across its entire Avilla Homes portfolio well into the first quarter of 2022.
Demand Outpacing Deliveries
Even with a normalization of net absorption, Petroulakis said demand is still outpacing deliveries across all multifamily classes.
“As more Americans are squeezed out of the for-sale market, we expect to see an even larger pool of Avilla renters seeking the single-family home lifestyle, which will push rents in many regions to continue to climb,” she said.
“Meanwhile, we are seeing continued demand across multiple consumer demographics, which points to higher mortgage payments influencing the decision to rent rather than own.
“Despite more people working from home, consumers want to live near great employers, retail and dining, freeways and recreational attractions. And many still who have the wherewithal to buy are choosing the flexibility, carefree maintenance and luxury they can get with a lease.”