Single-family rentals are on the rise, according to research from Zillow. Single-family rentals are climbing at a rate of 2.1 percent year-over-year, compared to the 1.5 percent growth of multifamily rentals. Additionally, Zillow’s Rent Index shows a higher price point on average of multifamily rentals compared to single-family rentals, as the median multifamily rental sits at $1,563, compared to the single-family median price of $1,420. However, with more renters looking to single-family options, the median rental price of these homes is sure to go up.
Around 45 percent of renters have considered single-family rentals over multifamily apartments, according to Zillow’s research. However, the disparity in price may be due to the fact that most multifamily rental units are in urban areas, where rent tends to be significantly higher than other areas. Urban areas are hot spots for rentals. Zillow notes that 57.1 percent of urban rental listings on Zillow in February were for multifamily units, and 36.8 percent of multifamily listings were in urban zip codes. The break from multifamily to single-family could be due to shifting needs among renters. Previous Zillow research indicated that, next to the price, having extra room is the most important factor renters consider. Apartments offer limited amounts of space, but rental houses offer the additional space that 60 percent of renters look for, without being too expensive. Renters with children will also look for more bathrooms and outdoor space, which is more likely to be found in a house rather than an apartment.
Single-family rentals are less expensive overall, but out of a list of the 100 most populated metro areas in the U.S., Zillow found that the lowest median single-family rental prices can be found in Youngstown, Ohio ($828 a month); Augusta, Georgia, at $946; Wichita, Kansa ($966); El Paso, Texas ($1,002); and McAllen, Texas ($1,013).
With home prices continuing to skyrocket in many markets, and inventory shortages plaguing many of those same areas, single-family rental homes are primed for continued growth...and bigger opportunities for investors in this sector.