Pandemic Creating Downward Pressure on Rental Market

The National Association of Homebuilders’ (NAHB) Real Rent Index was essentially flat in June, falling just 0.1%.

This is the Index’s first decline since 2013 and the annual growth rate of the Index fell to negative 1.4% after posting three months of growth, ranging between 4% and 8%.

According to the NAHB, the Index fell in June because rent inflation slowed with the Core CPI rose by 0.2%. this is the first month Core CPI increase since February.

The decline in the real rent index, according to the NAHB, could be related to the negative impact of COVID-19 on rental housing demand.

“Fallout from the virus has put downward pressure on demand in many sectors of the economy, including rental markets,” the report said.

Despite COVID-19’s impact on the market, single-family rents rose 1.7% annually in May 2020—the lowest annual growth rate since July 2010, according to CoreLogic.

CoreLogic noted rental demand is still impacted by unemployment rates and stay-at-home orders, despite local economics reopening.

Lower-priced rentals continued to prop up national rent price growth, continuing a trend from April 2014. Year-over-year growth in both tiers did slow in May 2020. Rent prices in the low-end tier—those with rent prices less than 75% of the regional average—rose 2.8% annually in May 2020.

This represented a 3.5% drop from May 2019. However, higher-priced rentals, which are those with prices more than 125% of the regions’ average rent, rose 1.3% in May 2020—down from a gain of 2.5% in May 2019.

Among the 20 metros studied by CoreLogic, Phoenix had the highest year-over-year growth in May with an increase of 6%. Neighboring Arizona city, Tucson, saw rent prices rise 3.5%, which was followed by Charlotte, North Carolina’s, 2.9% growth.

Honolulu was the only metro to experience an annual decline in rent prices, falling 0.4%. St. Louis had the largest deceleration in rent growth in May, with a reported slowdown of 3.8 percentage points from May 2019.