Single-Family Rental Market Index Slips, Is Still Near Record Highs

Even while it’s cooling, the single-family rental market remains hot.

That’s the word from the John Burns Real Estate Consulting (JBREC) and The National Rental Home Council (NRHC), which released its numbers from Q2 2021, showing rent growth accelerated in 2Q21, driven by still strong demand and tight supply.

The overall Single-Family Rental Market Index cooled slightly to 84 in 2Q21, down from an all-time high of 90 in 1Q21. While down sequentially, the index is still sharply higher year over year (YOY) from 76 in 2Q20. 

Highest Numbers Since 2019

Same store new lease rent growth of 10.4 percent and renewal rent growth of 5.1 percent drove blended rent growth of 6.5 percent in 2Q21. For perspective, new leases grew 8.7 percent in 1Q21 and renewals rose 5 percent, equating to 6.1 percent blended growth.

This is the highest blended rent growth in the survey history back to 2019 and more than double the 2.8 percent blended rent growth back in 2Q20.

This jibes with single-family rental growth forecasts earlier this year by Walker & Dunlop, which said it is expected to outpace multifamily, office, retail, storage, and hospitality growth by 2022.

“The single-family rental and build-for-rent sectors are among those with the strongest growth across all asset classes, with institutional investor interest in the space booming,” GlobeSt reported on the Walker & Dunlop forecast.

“While traditionally the SFR market has been dominated by individual or small-scale investors, the Great Recession changed all that—and the trend has only accelerated under the weight of the COVID-19 pandemic, which threw new migration patterns into the mix. 

“And where that demand has grown, institutional capital has followed. Walker & Dunlop estimates the SFR market to be valued at around $3.4 trillion—a staggering number, to be sure, when compared to the entire multifamily market, which is estimated at $3.5 trillion.”

More Than One-Third of Operators Have No Inventory

Newsworthy is that 35 percent of operators have basically no inventory (occupancy at 99 percent to 100 percent), up from 26 percent in 1Q21.

Same store average occupancy hit a new all-time high in our survey during 2Q21, reaching 98 percent. Occupancy has improved steadily since the beginning of our survey in 2019, jumping from already healthy pre-COVID levels of 95 percent to 96 percent.

National median rent at $1,751 according to operators surveyed, who skew toward higher price points.

For 2Q21, current leasing activity and expected leasing activity (next six months) both rose YOY.

JBREC/NRHC showed that its current leasing activity index hit 91 in 2Q21, down slightly from 94 in 1Q21, but still well above year ago levels of 77 in 2Q20. The expected leasing activity index for the next six months hit 84 in 2Q21, also down sequentially from 96 in 1Q21, but up YOY from 75 in 2Q20. The scale ranges from 0 (very weak) to 100 (very strong), with 50 being normal.

The survey showed 98 percent occupancy for same store portfolios in 2Q21, beating the previous record of 97.4 percent in 1Q21.

Occupancy Sub-Index Reading Falls

The occupancy sub-index reading fell to 71 in 2Q21, down from 80 in 1Q21. Scale ranges from 0 (lower) to 100 (higher), with 50 being the same. Note that this slight decline is a result of more operators rating occupancy as similar to the very high rates of prior quarters, which were very high already. As such, JBREC does not interpret it as a negative trend.

This proprietary survey measures the overall health and sentiment of national single-family rental markets. The quarterly survey was conducted Aug. 2 through Aug. 19, looking back at 2Q21 market conditions.

The 2Q21 survey results include 182 market ratings from professionally managed single-family rental operators who collectively manage 208K properties in 57 US metropolitan areas.