CoreLogic, Irvine, Calif., said rent prices in single-family rental properties increased 3 percent during 2019, the fastest such rate since 2016.
Single-family rents increased at a 2.9 percent pace in December, the company’s Single-Family Rent Index said.
CoreLogic Principal Economist Molly Boesel said she expects the sector’s growth trend to continue. “Employment growth is expected to remain strong in 2020,” she said. “This, coupled with rental vacancies reaching a 34-year low in the last quarter of 2019, could lead to continued rent increases in the near term.”
Boesel noted low rental home inventory relative to demand is driving single-family rent price growth. Single-family rent prices have climbed since 2010, but year-over-year rent price increases have slowed since peaking at 4 percent in February 2016.
December marked the sixty-eighth consecutive month in which low-end rentals propped up national SFR rent growth as newly formed households push up demand for entry-level properties, CoreLogic said. Rents in SFR properties with rent prices below 75 percent of the regional median increased 3.4 percent year-over-year in December while higher-end assets with rent prices exceeding 125 percent of a region’s median rent increased just 2.5 percent.
Among the 20 largest U.S. metros–and for the 13th consecutive month–Phoenix had the highest year-over-year increase in single-family rents at 6.7 percent. Tucson, Ariz., outpaced Las Vegas for the second-highest rent price growth with 5.7 percent and 5.1 percent gains, respectively, while Honolulu experienced the lowest rent increases among large metros at 0.5 percent.
Arbor, Uniondale, N.Y., said 2019 was likely an “inflection point” for the sector, “where it transitioned from a niche alternative asset class to a mainstream property type. As the sector gains interest from both investors and renters alike, build-to-rent strategies have emerged as a solution to match supply levels with growing demand.”
The Arbor Fourth Quarter 2019 Single-Family Rental Investment Trends report said challenges with attaining homeownership and a growing number of housing options across the U.S. have combined to increase the appeal of renting a house. “The SFR market continues to benefit from persistent demand growth, technological innovation and economies of scale,” the report said. “When you also consider the SFR market’s attractive borrowing rates and return margins, it’s easy to say the wind is in the sector’s sails.”