The K-Shaped Recovery Is Pushing Some SFR Rents Higher

The US economy’s K-shaped recovery is being borne out in rent growth for single-family rentals, with higher-priced rentals increasing 7.9% year-over-year in May and lower-tiered SFRs pushing up 4.6% over the same period.

A new report from CoreLogic shows that the lower-priced tier, defined as properties with rent prices less than 75% of the regional median, is nonetheless posting the fastest uptick in rents since January 2017. But high-priced rentals, which are defined as properties with rent greater than 125% of a region’s median, are showing the biggest increase in the history of the firm’s Single Family Rental Index, or SFRI.

Overall, single-family rental growth went up 6.6% nationwide in May, the quickest year-over-year index since January 2005 and nearly four times the May 2020 increase. Detached rentals are leading SFR growth with a 9.2% year-over-year increase in May (versus annual growth of 3.6% for attached rentals).

Phoenix leads the nation’s metros in SFR rent increases, a title it’s held for the last three years, at an increase of 14%. It’s followed by Tucson (+11.1%) and Las Vegas (+10.7%). On the flip side, two metros posted annual rent declines: Boston (-4.5%) and Chicago (-2.1%). CoreLogic analysts say Boston’s slowdown could potentially be attributed to college students choosing to skip big monthly rental payments in favor of virtual learning options closer to home, while Chicago’s numbers are reflective of a bigger decline in attached rental prices.

“Strong job and income growth, as well as fierce competition for for-sale housing, is fueling demand for single-family rentals,” CoreLogic’s Molly Boesel writes in a recent analysis of the May SFR data. “Looking ahead, these market forces are expected to remain for much of the year and keep rent increases high, particularly in urban areas and tech hubs as more people return to working in person.”