U.S. single-family rent growth strengthened in October, increasing 3.1% year over year, showing solid improvement from the low of 1.4% reported for June 2020, and up from the 2.9% rate recorded for October 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 October, a departure from the six-year trend of low-priced rentals having significantly faster growth then high-pried rentals (Figure 1). Unlike the high-priced tier, rent growth in the low-priced tier remains below year-pre-pandemic levels as the recession has disproportionately affected lower-wages workers. Rent prices for the low-end tier, defined as properties with rent prices less than 75% of the regional median, increased 3% year over year in October 2020, down from 3.6% in October 2019. Meanwhile, higher-priced rentals, defined as properties with rent prices greater than 125% of a region’s median rent, increased 3.1% in October 2020, up from a gain of 2.6% in October 2019.
Figure 2 shows the year-over-year change in the rental index for 20 large metropolitan areas in October 2020. Among the 20 metro areas shown, Phoenix had the highest year-over-year rent growth this October as it has since late 2018, with an increase of 8.9%, followed by Tucson (+7.6%) and Charlotte (+5.2%). Two metro areas experienced annual declines in rent prices: Boston (-4.1%) and Honolulu (-0.4%).
While 10 of the 20 metros shown in Figure 2 had lower rent growth than a year ago, Boston had the largest deceleration in rent growth, showing annual rent growth of 6.5 percentage points lower than in October 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% fewer jobs in October 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 15.4%, compared to October 2019, which has contributed to a 0.4% decline in single-family rent prices. Meanwhile, employment declines in Phoenix (-2.4%) and Tucson (-3.4%) 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.
© 2020 CoreLogic,Inc. All rights reserved.