SFR Rents Are Also Surging

In June, rents rose 11.1% and occupancy increased 1.1% year-over-year in the single-family rental sector, according to Yardi Matrix.

“The demand for the SFR sector is holding strong as people continue to seek more space,” according to Yardi. “The competitive housing market, driven in part by a lack of supply, is also sending would-be buyers to the SFR space.”

The sector’s strength was widespread. Each of the 30 top metros tracked by Yardi posted YOY rent growth in June. Seventeen of those markets had double-digit rent growth, while 24 had flat or increasing occupancy on a YOY basis in May. Showing the massive appeal of sunbelt markets, Tampa (31.3%), Phoenix (23.9%) and Miami (23.6%) posted the strongest YOY rent increases in June.

Single-family landlords are following a similar trajectory for multifamily rent growth. Apartment asking rents jumped 6.3% on a year-over-year basis in June, which was the most significant YOY national increase in the history of Yardi’s dataset.

Other sources also show that June was a top-performing month for multifamily. Realtor.com, for example, just reported that the US median rent price rose 8.1% year-over-year and 3.2% month-over-month to a new high of $1,575 in June. 

RealPage also noted strong rent growth. The company said that effective US asking rents are up 2% in June alone, an uptick that pushed year-over-year pricing increases up 6.3%.  That’s the highest 12-month increase recorded since early 2001. And the average US monthly apartment rent rings in at $1,513, also a high watermark. 

Still, don’t expect these sharp increases to continue forever. “Rent growth will not be able to continue at these levels indefinitely, but conditions for above-average growth are likely to persist for months,” according to Yardi.

Many factors have driven the astronomical rent growth we’ve seen this summer, Yardi also notes. One of those is migration to the Southwest and Southeast. Just look at apartment rent growth in Phoenix (17.0%), Tampa and the Inland Empire (both 15.1%), Las Vegas (14.6%) and Atlanta (13.3%).

“These metros were lower cost compared to larger gateway metros, but with double-digit rent increases, the affordability of these metros has begun to decline,” according to Yardi.

The unprecedented amount of government stimulus hitting the economy over the last year-and-a-half has also driven rent growth. Yardi says this stimulus led to consistent levels of collections across the country. As lockdowns limited travel and spending, household savings are also rising, increasing by more than  $2.5 trillion since the beginning of the pandemic

Supply and demand factors are also playing a role in these rent increases. According to the S&P Case-Shiller, home prices are up 14% year-over-year through June. These sharp increases are keeping people out of the home buying market and in rentals. Supply is also an issue with the US is on track to build 1.5 million units in 2021, according to the Census Bureau, which is not enough to meet demand.