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 September 2018 shows a national rent increase of 3.2 percent, compared to 2.7 percent in September 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 September 2018, despite declining growth rates among this tier over the last quarter. Rent prices of low-end rentals, defined as properties with rent prices less than 75 percent of the regional median, increased 3.9 percent year over year in September 2018, down from 4.2 percent in September 2017. Meanwhile, high-end rentals, defined as properties with rent prices greater than 125 percent of a region’s median rent, increased 2.8 percent in September 2018, up from 1.9 percent in September 2017.
Among the 20 metro areas shown in Table 1, Phoenix had the highest year-over-year increase in single-family rents in September 2018 at 6.6 percent (compared with September 2017), outpacing both Las Vegas and Orlando for the first time this year. Las Vegas experienced the second highest rent prices in September 2018 at 6.2 percent year over year, followed closely by Orlando at 6 percent. Honolulu saw the lowest rent price increase in September 2018 at 0.3 percent. However, rent prices have continued to rise in Honolulu since May 2018 when the metro experienced its first rent price increase following seven months of decline.
Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. Both Phoenix and Orlando experienced high year-over-year rent growth in September 2018, driven by employment growth of 3.8 percent and 5.9 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, Detroit experienced the lowest employment growth in September 2018, which could be a factor in its low rent growth of 2.8 percent.
Rent prices continue to increase in areas affected by last year’s hurricanes like the Houston metro area, which experienced growth of 3.3 percent year over year in September 2018. This is up from a 1.1 percent increase in October 2017, which was the first rent increase for Houston since April 2016. Houston’s recovery could be attributed to other stable economic factors like employment, as Houston saw the second highest employment growth behind Orlando in September 2018 at 4.3 percent.
“We’ve seen a slight uptick in rent prices over the past few months as strong employment growth continues,” said Molly Boesel, principal economist at CoreLogic. “The strength stems from the low-to-middle price tier, which has seen monthly average growth of 3.2 percent since January 2018.”
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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