Single-family rent growth continued its torrid pace in January.
Overall single-family rents increased 3.8% year over year in January 2021. That was an increase from the 2.9% rate recorded for January 2020 and the low of 1.4% reported for June 2020, according to the CoreLogic Single-Family Rent Index.
The price increases weren’t consistent across tiers, however. In fact, CoreLogic says the rent price growth of the low-price tier (rent prices less than 75% of the regional median) and high-price rent tiers (rent prices greater than 125% of a region’s median rent) is reflective of a “K-shaped” recovery.
In the low-price tier, rent remains below pre-pandemic levels, according to CoreLogic, increasing 2.9% year over year in January 2021, down from 3.7% in January 2020. Higher-priced rentals rose 4.2% in January, which was up from 2.5% in January 2020.
“This was the fastest increase in higher-price rents since August 2013 as prices were pushed up by higher-wage workers who are able to work from home can afford to move to larger homes that have more space,” according to CoreLogic.
Metro-level rent growth levels continued to support the notion that people were leaving the cities. Phoenix was the leader with 11% year-over-year rent growth. It was followed by Tucson, Az. (+9.8%) and Charlotte, NC (+7.6%).
The largest deceleration in rent growth occurred in Boston, which showed an annual rent growth of 12.9 percentage points lower than in January 2020. CoreLogic attributed some of that to college students choosing not to return to the city and continuing virtual learning elsewhere.
Chicago showed an annual rent growth of 4.2 percentage points lower than in January 2020. Like Boston, The Windy City saw significant differences in rents of attached versus detached properties. In Boston, rent prices of detached rentals fell by 0.5%, while attached rentals experienced a decrease of 9.1%. Chicago had a 4.2% decrease in attached rentals and a 3.6% increase in detached rentals.
Capital has taken note of the strength in single-family rentals. Some think the market is getting too frothy.
“Developers and builders of single-family [rentals] can get top-notch pricing,” Tom MacManus, president, MONEY360 said on a panel discussion during GlobeSt. Apartments Spring 2021 virtual conference.
But that feeling wasn’t universal on the panel. Trevor Koskovich, president of investment sales at NorthMarq, thinks the demand from the two largest demographic groups—baby boomers and millennials will drive growth. He said many millennials are so saddled with student debt that it may be hard for them to purchase a home. “The millennials that have dogs and are starting to expand their family for the first time are going to rent these,” he said.