According to CoreLogic’s latest report, the single-family rent prices increased 3.1 percent year over year in December 2018. The Single-Family Rent Index (SFRI), released on Tuesday, which analyzes single-family rent price changes nationally and among 20 metropolitan areas. Data collected for December 2018 shows a national rent increase of 3.1 percent, compared to 2.9 percent in December 2017.
The report found that Phoenix had the highest year-over-year rent price increase at 6.9 percent. This was followed closely by Las Vegas at 6.8 percent. Orlando experienced the third highest year-over-year rent increase at 5.1 percent. Low-end rent prices were up by 3.7 percent, compared to high-end price gains of 2.9 percent. It indicated that low-end rental growth outpaced high-end gains for the fifth consecutive year in 2018.
The SFRI noted that low rental home inventory, relative to demand, fuels the growth of single-family rent prices. Single-family rent prices have climbed between 2010 and 2018. However, year-over-year rent price increases overall have slowed since February 2016, when they reached a peak at 4.2 percent, and have stabilized over the last year with a monthly average of 3 percent.
On a national basis, the rent growth was continuously propped up by low-end rentals throughout the previous year. This trend held steady into December. Rent prices among this tier, that CoreLogic defined as properties with rent prices less than 75 percent of the regional median, rose by 3.7 percent on an annual basis in December 2018—dropping slightly from the 3.9 percent increase experienced in December 2017.
Meanwhile, high-end rentals, defined as properties with rent prices greater than 125 percent of a region’s median rent, increased 2.9 percent in December 2018, up from 2.5 percent in December 2017. In disaster-affected areas, rent prices experienced steady growth throughout the past year. However, in December, Houston experienced the lowest rent increases of all analyzed metros at 1 percent, down from 2.7 percent in 2017. This is the lowest rent growth for the Houston metro area since September 2017, in the immediate aftermath of Hurricane Harvey.
“Single-family rents increased an average of 3 percent in 2018, exceeding the 2.7 percent average pace experienced in 2017,” said Molly Boesel, Principal Economist at CoreLogic. “The strengthening in rent prices reflects strong economic and labor markets. However, low-end rental increases outpaced high- end increases for the fifth consecutive year, suggesting continued supply constraints on the lower end.”
Stronger rent growth was seen in metro areas such as Orlando and Pheonix with limited new construction, low rental vacancies and strong local economies that attract new employees. Both the cities high year-over-year rent growth in December 2018, driven by employment growth of 4.8 percent and 4 percent year over year, respectively.