CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released its latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas. Data collected for October 2018 shows a national rent increase of 3 percent, compared to 2.7 percent in October 2017.
Low rental home inventory, relative to demand, fuels the growth of single-family rent prices. The SFRI shows single-family rent prices have climbed between 2010 and 2018. However, year-over-year rent price increases have slowed since February 2016, when they peaked at 4.2 percent, and have stabilized over the last year with a monthly average of 2.9 percent.
National rent growth continued to be propped up by low-end rentals in October 2018. Rent prices among this tier, defined as properties with rent prices less than 75 percent of the regional median, increased 3.9 percent year over year in October 2018, down from 4.1 percent in October 2017. Meanwhile, high-end rentals, defined as properties with rent prices greater than 125 percent of a region’s median rent, increased 2.6 percent in October 2018, up from 2 percent in October 2017. High-end rent price increases have steadily declined over the last quarter, dropping to 2.6 percent this October, down from 2.9 percent in June when it reached its peak.
Among the 20 metro areas shown in Table 1, Las Vegas had the highest year-over-year increase in single-family rents in October 2018 at 6.6 percent (compared with October 2017), followed closely by Phoenix at 6.4 percent. Orlando experienced the third highest year-over-year rent increase at 5.3 percent, down 0.6 percent from the metro’s rent growth in September 2018. Seattle saw the lowest rent price increase in October 2018 at 0.3 percent. This is the lowest year-over-year rent growth for Seattle since May 2010.
Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. Both Orlando and Phoenix experienced high year-over-year rent growth in October 2018, driven by employment growth of 4.4 percent and 3.7 percent year over year, respectively. This is compared with the national employment growth average of 1.7 percent, according to data from the United States Bureau of Labor Statistics. Of the 20 metros analyzed, St. Louis experienced the lowest employment growth in October 2018, which could be a factor in its lower-than-average rent growth of 2.5 percent.
Rent prices are beginning to increase in areas affected by last year’s hurricanes like the Houston metro area, which experienced growth of 2.4 percent year over year in October 2018. This is up from a 1.1 percent increase in October 2017, which was the first rent increase for Houston since April 2016, but down from the 3.3 percent increase the metro saw in September 2018.
“While employment growth helps feed rent growth, this relationship doesn't always hold up, especially for cities with very high rents,” said Molly Boesel, principal economist at CoreLogic. “For example, employment growth in Seattle this October was more than double that of the U.S., but rent growth during the same time period was weak. Of the 20 metros analyzed in the CoreLogic SFRI, Seattle ranks among those with the highest rent, which suggests there is a limit to how much rents can increase.”
The single-family rental market accounts for half of the rental housing stock, yet unlike the multifamily market, which has many different sources of rent data, there are minimal quality adjusted single-family rent transaction data. The CoreLogic Single-Family Rent Index (SFRI) serves to fill that void by applying a repeat pairing methodology to single-family rental listing data in the Multiple Listing Service. CoreLogic constructed the SFRI for over 70 Core Based Statistical Areas (CBSAs)—including 40 CBSAs with four value tiers—and a national composite index.
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