U.S. single-family rent growth strengthened in September, increasing 2.5% year over year, showing solid improvement from the low of 1.4% reported for June 2020, but a slowdown from the 3% rate recorded for September 2019, according to the CoreLogic Single-Family Rent Index (SFRI). 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.
Low-priced and high-priced rentals grew at roughly the same rate in September, a departure from the six-year trend of low-priced rentals having significantly faster growth then high-pried rentals (Figure 1). Rent prices for the low-end tier, defined as properties with rent prices less than 75% of the regional median, increased 2.4% year over year in September 2020, down from 3.7% in September 2019. Meanwhile, higher-priced rentals, defined as properties with rent prices greater than 125% of a region’s median rent, increased 2.3% in September 2020, down from a gain of 2.7% in September 2019.
Figure 2 shows the year-over-year change in the rental index for 20 large metropolitan areas in September 2020. Among the 20 metro areas shown, Phoenix had the highest year-over-year rent growth this September as it has since late 2018, with an increase of 6.9%, followed by Tucson (+6.2%) and Charlotte (+4.3%). Two metro areas experienced annual declines in rent prices: Boston (-2.9%) and Honolulu (-0.5%).
Boston had the largest deceleration in rent growth in September, showing annual rent growth of 5.7 percentage points lower than in September 2019. The weakness might be attributed to a large number of students choosing to not return to Boston — a city that’s home to 35 colleges and universities — but instead opting to continue virtual learning in their hometowns. U.S. unemployment rates remain elevated and the nation had 6.4% fewer jobs in September 2020 than a year earlier. However, some areas of the country are continuing to experience higher rates of job loss — adversely impacting rental demand and slowing rent price growth. For example, Honolulu posted an employment decrease of 16.3% year over year in September and ongoing rent declines. Meanwhile, employment declines in Phoenix (-2.9%) and Tucson (-4%) were relatively small amongst the 20 metros covered in the report. With the continued resurgence of COVID-19 cases across the country, we may expect to see further disruption of local rental markets.
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