Low rental-home inventory is prompting single-family rental prices to rise, driven mostly by an upswing in demand from millennials. However, annual increases are slowing, according to a new report from CoreLogic, a real estate data firm.
U.S. single-family rent prices rose 2.9% year over year in July, which is lower than the 3.1% gain in July 2018. The highest annual rent price increase was in Phoenix, at 7.2%.
Rent growth continues to be propelled primarily by low-end rentals, defined as properties with rent prices at less than 75% of the regional median. The lower tier of the market is seeing more increases from higher demand than the upper tier, which includes rent prices that are greater than 125% of a region’s median rent. Low-end rent prices rose 3.5% in July, compared to high-end price gains of 2.7%, CoreLogic reports. Annual increases in the low-end rental market have “consistently outpaced” the high-end tier since May 2014, CoreLogic notes.
“Rent increases on entry-level properties continued to outpace the rest of the rental market,” says Molly Boesel, principal economist at CoreLogic. “This trend should continue in the near term with strong demand from younger millennials who indicate they prefer to rent rather than own a home.”
Metro areas with limited new construction, low rental vacancies, and strong local economies and employment are posting the highest rent growth. Phoenix’s higher annual rent growth in July was attributed to a 2.9% growth in its annual employment. Orlando, Fla., also has seen higher annual employment growth, at 3.8%, which caused its above-average annual rent increases of 3.5% in July, CoreLogic notes.
Source: “Annual Rent Gains for Low-Priced Rental Homes Accelerate But Remain Above Those for High-Cost Rental Homes,” CoreLogic Insights Blog (Sept. 17, 2019)
