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US Single-Family Rents Up 3 Percent Year Over Year in August

San Diego had the highest year-over-year rent growth in August

Shu Chen    |    Housing Trends

  • National rent growth decelerated in August 2017 compared with August 2016
  • Low-end rent growth was almost double high-end rent growth
  • Overall Index Pulled Down By High-End Segment

Single-family rents climbed steadily between 2010 and 2016, as measured by the CoreLogic Single-Family Rental Index (SFRI). However, the index shows year-over-year rent growth has decelerated slowly (Figure 1) since it peaked early last year. In August 2017, single-family rents increased 3 percent year over year, a 1.4 percentage point decline since the growth rate hit a high of 4.4 percent in February 2016. 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.

Using the index to analyze specific price tiers reveals important differences. Figure 1 shows that the index’s overall growth in August 2017 was pulled down by the high-end rental market, defined as properties with rents 125 percent or more of a region’s median rent. Rents on higher-priced rental homes increased 2.3 percent year over year in August 2017, down from a gain of 2.5 percent in August 2016. Rents in the low-end market, defined as properties with rents less than 75 percent of the regional median rent, increased 4.4 percent year over year in August 2017, down from a gain of 5.4 percent in August 2016.

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Rent growth varies significantly across metro areas[1]. Figure 2 shows the year-over-year change in the rental index for 20 large metro areas in August 2017, and shows that most of these markets had year-over-year rent increases. 

Metro areas with limited new construction and strong local economies that attract new employees tend to have low rental vacancy rates and stronger rent growth. Phoenix experienced 4.3 percent year-over-year rent growth in August 2017, driven by employment growth of 2.8 percent year over year, which more was more than double national growth of 1.2 percent. In contrast, Houston, which has been hit with energy-related job losses since early 2015, experienced a 0.9 percent year-over-year decrease in rents, according to CoreLogic data. The results are for rents through the end of August 2017, and the impact of Hurricane Harvey is not captured in these results.

[1] Metro areas used in this report are Core Based Statistical Areas. The SFRI is computed for 75 CBSAs.

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