With skyrocketing home prices, insufficient housing inventory, and crippling student debt, many potential homebuyers simply don’t have the means to save up for a downpayment on a home. For many, that leaves rental as the only option, and a pair of recent reports have highlighted the growth and potential investment opportunities in the single-family rental (SFR) market.
First up, CoreLogic [1] has released their Single-Family Rent Index covering data from January 2018. CoreLogic’s SFRI “analyzes single-family rent price changes nationally and among 20 metropolitan areas.” For January, CoreLogic reports a national rent increase of 2.8 percent, compared to an increase of 2.6 percent in January 2017.
Much of this increase is being driven by one of the same factors affecting home prices—a lack of inventory. Year-over-year SFR price increases peaked in February 2016 at 4.1 percent. Rent prices as a whole, however, have been on the rise since 2010.
High-end rent prices increased 2.4 percent year over year in January, up from a 1.5 percent increase noted in January 2017. (CoreLogic defines high-end rentals as properties with rent prices 125 percent or more of a region’s median rent.) Rent prices among low-end rentals (properties with rent prices less than 75 percent of the regional median) increased 3.8 percent in January 2018, down from a gain of 4.7 percent in January 2017. On the low-end side of things, properties with rent prices less than 75 percent of the regional median increased 3.8 percent in January 2018, down from January 2017’s 4.7 percent increase.
Las Vegas demonstrated the highest year-over-year increase in SFR rents in January 2018, coming in at 4.8 percent year-over-year. Of the markets examined by CoreLogic, only Urban Honolulu featured decreasing rent prices, declining 1.1 percent year-over-year.
According to a recent RENTCafe analysis [2], the number of single-family rental homes has surged over the past decade, driven forward initially by an influx of available rental inventory after the 2008 financial crisis. U.S. Census estimates reveal that single-family rentals increased by 31 percent in the years between 2007 and 2016, while multifamily rentals increased by only 14 percent during that period. Put another way, single-family rentals increased by 3.6 million units during that decade; rental apartments increased by 3.2 million units.
As of the 2016 census, the Census Bureau [3] counted over 15 million single-family homes for rent in the United States and over 26 million apartments for rent. RENTCafe found that, between 2007 and 2016, single-family rentals increased faster than rental apartments in 22 of the 30 largest U.S. cities.
As reported by Urban Institute [4], the majority of U.S. single-family rentals are owned by investors. To learn more about opportunities within the SFR market, check out DS News’ recent interview with CoreVest CEO Beth O’Brien by clicking here [5].