U.S. single-family rental price growth hit yet another record high in January, according to CoreLogic’s Single Family Rent Index (SFRI) report released Tuesday.
The SFRI analyzes single-family rent price changes nationally and across all major metropolitan areas.
Year-over-year rental prices grew 12.6% in January according to the SFRI. In comparison, rent prices rose only 3.9% year over year in January 2021. All major metro areas analyzed saw year-over-year rental price growth increases, with Sun Belt cities seeing the largest gains.
“Single-family rent growth extended its record-breaking price growth streak to 10 consecutive months in January,” Molly Boesel, principal economist at CoreLogic, said in a statement.
Miami had the highest level of year-over-year price growth, with a 38.6% increase recorded in January. A year prior, the year-over-year growth rate was just 2.2%. Orlando and Phoenix had the second- and third-highest rental price increases, with growth rates of 19.9% and 18.9% respectively.
On the other end of the spectrum was the Washington, D.C. metro area with an annual rent price growth rate of 5.6%.
In addition to looking at rental price growth by metro area, CoreLogic also looks at rental price changes across four different tier of rent prices. All four tiers saw annual price growth with lower-priced rents (75% or less than the regional median rent) rising 12%, lower-middle priced rents (75% to 100% of the regional median) rising 13.3%, higher-middle priced rents (100% to 125% of the regional median) rising 13.4% and higher priced rents (125% or more than the regional median) rising 12.2%.
The report attributes at least some of the price growth to a shortage of available rental properties. Mandy Nichols an agent for the Dallas-Fort Worth-based Brixston Real Estate, said she is seeing this in her local market.
“There just aren’t enough properties,” Nichols said. “It is supply and demand. We have a huge demand right now and the supply isn’t keeping up and whenever that happens the prices rise.
In addition, according to CoreLogic, the cost of purchasing a home rose by 19% from January 2021 to January 202, shutting out many potential homebuyers and forcing them back into the pool of renters.
“Right now you have people who can qualify for a loan and then you have people who can qualify for a loan and be competitive in this intense housing market,” Michael Nourmand, the president of Beverly Hills-based brokerage Nourmand & Associates Realtors, said. “People are being priced out right now not because they can’t let a loan, but because they can’t compete on contingencies or with all-cash offers, so they end up having to rent.”
As rents continue to rise, more people are looking to buy homes, thanks to the low interest rates and the ability to use at least some of their mortgage payment as a tax write-off. Nichols said that this is definitely the case in the Dallas-Fort Worth metro area.
“With rents continuing to rise, we will absolutely see more people looking to buy, but the problem is, there is nothing to sell, so they end up stuck and continuing to rent,” Nichols said.
At the start of the COVID-19 pandemic, many people began looking for standalone rental properties. Due to this, these detached rentals saw rapid price increases creating a price-growth gap between detached and attached rental properties.
However, as rental inventory began to decrease this fall, the price growth gap between attached and detached rentals started to close. As of January 2022, the year-over-year price growth for attached rental properties was 12.2% and 12.4% for detached rental properties. This is the closest the rates have been since March 2020.