SFR Rent Growth Continues to Decelerate
The increases are still large, but as inflation keeps growing and the economy tightens, people have less for housing.
Single-family rentals, a popular part of the residential segment of commercial real estate, continues to feel pressure on rent growth.
In its latest SFR index, CoreLogic says that rent growth has decelerated for the fifth month running. “Single-family rents increased 10.2% year over year in September, down from 13.9% in April 2022,” the firm wrote. “Lower-priced rent growth continued at record double-digit annual gains, up 12.1%, while higher-priced rent growth decelerated at the fastest pace since April’s peak.”
CoreLogic split out SFT into four subsets. Lower-priced (75% or less than regional median), was up 8.5% year over year. Lower-middle priced (75% to 100% of regional median), up 9.4% since September 2021. Higher-middle priced (100% to 125% regional median) was up 10.6%. Higher-priced (more than 125% of median), up 11.1%.
“Miami posted the highest year-over-year increase in single-family rents in September 2022 at 20.1%,” the firm noted. “Orlando, Florida recorded the second-highest gain at 18.3%, while Boston ranked third at 10.6%. St. Louis posted the lowest annual rent price gain at 5.2%. While rent growth in many fast-growing metros has decelerated compared to last September, return to offices, colleges and cities is driving rent growth higher in other metros where increases were lagging, such as Boston, New York, Chicago, and Philadelphia.”
There’s nothing basic in the dynamic that is unique to SFR. Multifamily rent growth went over the top and now is sliding down, with September proving the turning point, so feeling the pinch but not quite as soon as single-family.
That is still an enormous aggregate increase in rents, but a CoreLogic point about SFR applies across the whole rental housing spectrum: “The rent increase slowdown comes as inflation stretches tenants’ pocketbooks.”
There comes a time when accumulated pressures on personal and family finances means that people have to cut back on spending, and housing costs have been a leading contributor to higher inflation and, in turn, actions by the Federal Reserve to drive up interest rates in order to cool down the economy.
The combination could become difficult. On the regulatory side, renters seem to be flexing their muscles at the polling stations, with a number of successful local moves toward rent control. The financial front, though, is icier. Growing financing rates are making it difficult for new projects or refis to get the lending amounts and terms they need. Owners, investors, and developers are facing tougher times as a result.