The rental market faced a tumultuous journey this year, experiencing the lowest annual growth rate this June for single-family rent prices in 10 years. While national rent prices picked up pace in the late summer, September data shows a divide in recovery across price tiers. Compared to a year ago, lower-priced rentals continued to show declines while higher-priced rentals began to match last year’s growth rates. Those in higher-paying positions that easily transitioned to remote work were able to continue renting in higher price tiers, or even upgrade to new rentals with more space to accommodate working from home. Meanwhile, renters among the lower-priced tier have faced greater job market instability, which by extension has negatively impacted rent price growth.
“Single-family rent prices regained strength in September and were just half a percentage point shy of their pre-pandemic national growth rate,” said Molly Boesel, principal economist at CoreLogic. “The strength in rent growth was driven primarily by mid-to-high priced rentals, which have regained their lost momentum in late-spring. Lower-priced rentals are still the furthest below their early 2020 growth rates, which is a sign that many lower-income households may be struggling to meet rent payments.”
To gain an accurate view of single-family rental prices, CoreLogic examines four tiers of rental prices. In September 2020, the national single-family rent growth across the four tiers, and the year-over-year changes, were as follows:
- Lower-priced (75% or less than the regional median): 2.4%, down from 3.7% in September 2019
- Lower-middle priced (75% to 100% of the regional median): 2.5%, down from 3% in September 2019
- Higher-middle priced (100% to 125% of the regional median): 2.6%, unchanged from September 2019
- Higher-priced (125% or more than the regional median): 2.3%, down from 2.7% in September 2019
Among the 20 metro areas shown in Table 1, and for 22 consecutive months, Phoenix had the highest year-over-year increase in single-family rents in September 2020 at 6.9%. Tucson, Arizona, had the second-highest rent price growth in September 2020 with a gain of 6.2%, followed by Charlotte, North Carolina, at 4.3%. Conversely, Honolulu and Boston posted an annual decline in rent prices, with the latter experiencing the most significant decline at -2.9%. The drop in Boston could be attributed to the decline of the higher-education population, as students opt to continue virtual learning in their hometowns, and employees leave high cost densely populated urban areas to work remotely.
Unemployment rates remained elevated across the country, with some regions and metros experiencing higher rates of job loss, and therefore downward pressure on rent prices, than others. For example, in September, year-over-year employment decreased by just 2.9% in Phoenix, a popular destination for those seeking warmer weather during winter months. Subsequently, rent prices have stayed comparatively strong here. Meanwhile, popular tourist destinations like Honolulu posted an employment decrease of 16.3%, compared to September 2019, which has contributed to a decline in rent prices. As the economy slowly recovers from the initial impact of the pandemic and contends with the resurgence of coronavirus (COVID-19) cases, we may see continued fluctuation of rent prices in metros across the nation.
The single-family rental market accounts for half of the rental housing stock, yet unlike the multifamily market, which has many different sources of rent data, there are minimal quality adjusted single-family rent transaction data. The CoreLogic Single-Family Rent Index (SFRI) serves to fill that void by applying a repeat pairing methodology to single-family rental listing data in the Multiple Listing Service. CoreLogic constructed the SFRI for over 80 metropolitan areas — including 45 metros with four value tiers — and a national composite index.
The CoreLogic Single-Family Rent Index analyzes data across four price tiers: Lower-priced, which represent rentals with prices 75% or below the regional median; lower-middle, 75% to 100% of the regional median; higher-middle, 100%-125% of the regional median; and higher-priced, 125% or more above the regional median.
Median rent price data is produced monthly by CoreLogic RentalTrends. RentalTrends is built on a database of more than 11 million rental properties (over 75% of all U.S. individual owned rental properties) and covers all 50 states and 17,500 ZIP codes.
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