SFR Vacancy Rate Stays Flat While Delinquency Rate Rises Slightly

Vacancy rates among single-family rental securitizations remained relatively flat month-over-month despite a general trend of a rising number of lease expirations,  according to data reported by Morningstar Credit Ratings in its June 2015 Single-Family Research: Performance Summary Covering All Morningstar Rated Securitizations released Monday.

The Morningstar data found that delinquency rates rose slightly across all transactions even though the number of tenants late on their rent payments remained low. The transaction with the highest number of tenants with delinquent payments (out of the 17 single-borrower, single-family rental securitizations covered in the report) was ARP 2014-SFR1 (American Residential Properties), which increased from 2.3 percent in April to 2.4 percent in May. The vacancy rate on the ARP transaction dropped from 8.0 percent in April to 7.3 percent in May and is way down from its peak of 10.0 percent reached in February.

However, whereas the ARP transaction was the only one out of 17 securitizations that reported a delinquency rate of 1 percent of higher in April, the number increased to six out of 17 securitizations with a delinquency rate above the 1 percent level in May.

The ARP 2014-SFR 1 and SBY 2014-1 (Silver Bay Realty) reported an elevated number of month-to-month (MTM) leases compared to the other 15 securitizations, according to Morningstar. The ARP and SBY transactions reported 10.8 percent and 7.4 percent of properties with MTM leases in May, respectively (down from 11.0 percent and 8.4 percent in April), but still remained higher than other single-family securitizations, which generally reported MTM shares of lower than 5 percent.

"Not surprisingly, these two securitizations report higher retention rates for their MTM leases," the report said. "MTM tenants are usually subject to a monthly fee, which may encourage MTM tenants to eventually sign full-time leases."

Overall, monthly retention rates remained in the mid-70s to low-80s range, according to Morningstar.

"Vacancy rates generally remain low, cash flows remain sufficient to cover bond obligations, and the asset class mostly shows performance in line with its recent history," Morningstar said in the report.

Click here to see the complete Single-Family Rental Research: Performance Summary Covering All Morningstar-Rated Securitizations for June 2015.