SFR Rents Continue to Decline But Some Investors Remain Undeterred
Institutional investment is growing but only in select markets.
CoreLogic reported last week that the annual US single-family rent growth continue its downward slide in March, dipping to 4.3%, the 11th straight month of year-over-year deceleration. All tracked markets fell, YoY.
The range of annual rental price gains was 7.7% in Charlotte to 0.4% in Seattle. Las Vegas and Phoenix saw annual rental cost declines in March of -0.2% apiece.
How significant is the cooling/? It was well below the 25% to 41% YoY gains recorded for top metros in March 2022 as measured by the CoreLogic Single-Family Rent Index, which analyzes single-family rent price changes nationally and across major metropolitan areas.
“Single-family rent price gains continued to slow year over year in March, with growth at about one-third of the rate as observed one year earlier,” Molly Boesel, principal economist at CoreLogic, said in the report.
“The slowdown is more pronounced in the higher-priced tier, where growth is now about the same as it was before the pandemic. However, gains in the lower tier are still twice the pre-pandemic rate, with all tracked metro areas posting increases at that price level.”
Investment, though, is still moving into this category, according to various reports.
Moody’s Analytics, for example, reports institutional ownership of single-family rentals growing, but this activity is quite sensitive to market conditions, writes its analysts Ermengarde Jabir, Juan Acosta, and Thomas LaSalvia.
They said that “rapid” growth remains, but still a small percentage of the US market, and that “given economies of scale, a critical mass limits growth to particular locations.”
Because these investors are value seekers, they are sensitive to market conditions, Moody’s writes.
Also, cross-over investments between the single-family and multifamily markets are an emerging trend as companies look to expand into different market segments, combining property types into a single investment portfolio, according to a recent industry panel.