Median single-family rents are increasing, with the first half showing a 1.7% gain year-over-year, up $36 to $2,135. Although rent growth is accelerating, it remains below both the inflation rate and average wage growth, according to Rentometer’s mid-year national single-family rental market report.
Prices also remain below the elevated levels observed during the first two post-pandemic years, as well as the typical 2% to 4% historical growth range. This suggests continued softness in the market and slower-than-usual gains for investors, said the report.
Rents grew the fastest in the Midwest and Northeast markets, with increases of 6.1% and 4.5%, respectively. They are followed by 2.7% in the Southeast and 3.1% in the Pacific region. Median rents in the Rocky Mountain region rose by 1.1%, while they remained flat in the Southwest. Boston logged the highest annual growth among large cities, with a three-bedroom single-family home renting for an average of $4,500, up 12.5% year over year. Staten Island, Long Beach and Seattle also posted strong increases at 9.4%, 9% and 8.4%, respectively. Each of these reflects continued demand in higher-cost coastal markets, Rentometer emphasized.
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Some cities, however, saw rents decline over the first half, including Fort Wayne, Indiana, where rents fell 6.4%. Dallas and Santa Ana, California, also experienced significant single-family rent drops of -6.3% and -5%, respectively.
The single-family vacancy rate continued to trend upward, reaching a nine-year high at 6.3% during the first quarter, Rentometer said. This mirrors a broader apartment sector trend of higher vacancy rates, which reached 8.2% during the first quarter. Single-family vacancy is also being driven by a record number of newly built units as the sector has attracted significant institutional investment over the past few years, said the report. Most of the built-to-rent inventory is located in the Southeast and Southwest regions that have recently experienced slower or even negative rent growth.
Over the past five years, advertised rents for single-family rentals have increased by 39.5%, compared to an estimated 23% rise in median household income during the same period, which has been a boon for SFR investors but places considerable strain on renters. To comfortably afford a three-bedroom single-family rental, households need to earn well above the local median income in many cities. For example, in San Francisco, where the median rent is just under $5,000, a tenant would need to earn nearly $200,000 annually, far above the city’s median household income of approximately $141,000.
Renters looking for value will find it most often in the Midwest, according to Rentometer. Toledo is the most affordable large city in the U.S. to rent a single-family home, with median asking rents for 3-bedroom homes at $1,250. To comfortably afford that payment, a household would need to earn about $50,000 per year, which is just above Toledo’s median household income of $49,700.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
