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Revisiting Single-Family Rental Securitizations

The latest single-family rental report from Morningstar Credit Ratings finds the average vacancy rate across single-borrower, single-family rental securitizations improving for the fifth consecutive month. The average SFR securitization vacancy rate declined to 4.4 percent in March 2018 from 4.6 percent in February. This continued a five-month trend of steadily improving vacancy rates.

Rents rose 4.2 percent in March, according to Morningstar, compared to a revised increase of 3.2 percent measured for February. The rent change for renewal properties increased 4.2 percent in February, the latest month for which data was available to be analyzed. During that same period, vacant-to-occupied properties increased by 3.2 percent.

Morningstar reports that the average retention rate on full-term leases stood at 75.8 percent in February, the most recent month for which data was available. All of the transactions Morningstar reported on had retention rates of at least 74.9 percent, with 10 of the deals featuring retention rates of higher than 80 percent.

Vacancy rates in the Houston metropolitan statistical area (MSA) continue to the highest of the top 20 MSAs. However, Houston’s 6.4 percent rate in March was down considerably over the past six months or so—it stood at 10 percent in October 2017, and by February 2018 it had dropped to 7.3 percent. The next-highest vacancy rate was shared between the Charlotte and Raleigh-Cary, North Carolina MSAs, both of which featured a 5.5 percent vacancy rate for March.

The Phoenix MSA boasted the highest blended rent growth for March, coming in at 6.5 percent.  Denver-Aurora and Las Vegas tied for second behind Phoenix, both hitting 5.7 percent blended rent growth for the month.

Be sure to check out DS News’ exclusive interview with Morningstar President Brian Glow. To read Morningstar’s full single-family rental research report for March 2018, click here.

About Author: David Wharton

David Wharton, Editor-in-Chief at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has nearly 20 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. He can be reached at [email protected]

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