Vacancies continued to rise across 23 single-borrower, single-family rental transactions as higher monthly lease expirations in the summer pushed the vacancy rate to 4.9 percent in July from 4.5 percent in June, according to the recent Morningstar Single-Family Rental Summary.
The report states that this marked the fourth straight monthly increase in vacancy, but the overall level remained low. They also say that beginning this month, Morningstar Credit Ratings, LLC included a geographical review of vacancy by tracking the vacancy rate of securitized properties in the metropolitan statistical areas most typically seen in single borrower, single-family rental transactions. The report shows that at 7.4 percent, Houston had the highest vacancy rate among these MSAs.
Morningstar shows that lease expirations across all single-family rental transactions were down to 7.8 percent in July. This is compared with 8.1 percent in June. They do note, though, that this number does remain elevated. Morningstar believes that more lease expirations can contribute to higher vacancy.
Additionally, Morningstar reports that delinquency rates in single-family rental securitizations rose up to 0.6 percent in July from 0.5 percent the prior month. They also report that as of June, the most recent data available, retention rates for full-term leases stayed in the mid-70s, as 21 of the 23 transactions reported a retention rate of 70 percent or above. Morningstar shares that because more leases expire in the summer months, this is the reason that the turnover rate rose. Likewise, this marking a six-month trend.
It was also reported that the PRD 2014-SFR1 transaction was paid in full as of the most recent remittance report and has been removed from the performance summary. Morningstar shows that rents for properties backing single-family rental securitizations rose by 5.2 percent from their prior contractual rents, continuing to outpace the year-over-year increases of three- and four-bedroom RentRange, LLC median rents. They report, however, that the margin narrowed. In addition, Morningstar shows that average contractual rents in the top single-family rental MSAs are mostly higher than their property-level RentRange estimates.