Data revealed in CoreLogic’s latest Single-Family Rent Index (SFRI), released Tuesday, is indicative of a promising future for investors in this sector. The report revealed a 3 percent year over year increase of single family rent prices in October 2018, compared to 2.7 percent around the same period last year.
Low rental home inventory, relative to demand, has spurred the growth in single-family rent prices, the report indicated. The SFRI reflected an upward spike in rent prices between 2010 and 2018. However, the increase in year over year rent prices have slowed since they peaked at 4.2 percent in 2016, projecting stability over the past year at a monthly average of 2.9 percent.
Low-end rentals saw a 3.9 percent year over year increase—a drop from 4.1 percent last year. High-end rentals, on the other hand, increased 2.6 percent in October 2018, up from 2 percent in October 2017. Las Vegas reflected the highest year-over-year increase in single-family rents in October 2018 at 6.6 percent, the report found. Phoenix followed closely at 6.4 percent. Orlando experienced the third highest year-over-year rent increase at 5.3 percent, down 0.6 percent from September 2018.
According to the report, the growth in rent prices in both Orlando and Phoenix is driven by employment growth of 4.4 percent and 3.7 percent year over year, respectively. The lowest rent price increase was recorded at 0.3 percent in Seattle this month—also the lowest year-over-year rent growth for the metro since 2010.
The report indicated that metros with limited new construction, low rental vacancies, and strong local economies are key drivers of stronger rent growth. Lowest employment growth was recorded in St. Louis at 2.5 percent. The report pointed out that disaster-affected areas such as Houston metro area experienced a growth of 2.4 percent year over year in October 2018.
“While employment growth helps feed rent growth, this relationship doesn't always hold up, especially for cities with very high rents,” said Molly Boesel, Principal Economist at CoreLogic.
Though the overall outlook for the single-family rental sector remains positive, it can be hard to navigate the ever-evolving landscape of the SFR market. Focusing on how to build, manage and grow investment opportunities, 2019 will see an array of housing and mortgage professionals come together at The Guest House of Graceland, Memphis, Tennessee between March 11-13 for the Single Family Rental Summit. The Summit will feature subject-matter experts who will answer questions and offer viable solutions related to property management, acquisition, disposition, and financing. Click here to register for the summit.