Strong demand and the labor market are fueling single-family rent price increases which remain at record highs.
September data from CoreLogic’s Single-Family Rent Index shows rents increased 10.2% year-over-year (YOY), compared to a 2.6% YOY increase in September 2020.
Rents increased across all four tiers of rental prices used by CoreLogic. Lower-priced rentals (less than 75% of the regional median) saw an increase of 8.3% YOY, while rents in the lower-middle price range (75%-100% of the regional median) rose 9.3% YOY, both more than doubling their growth from the same time in 2020.
Rents for higher-priced properties broke 10%, with higher-middle priced (100%-125%) rents climbing 10.5%, compared to 2.4% in September 2020. Higher-priced rentals (125% or more of the regional media) rose 11%, up from 2.8% in September 2020.
“Single-family rental vacancy rates remained near 25-year lows in the third quarter of 2021, pushing annual rent growth to double digits in September,” said CoreLogic principal economist Molly Boesel.
“Rent growth should continue to be robust in the near term, especially as the labor market improves and the demand for larger homes continues.”
The housing shortage driving up home prices has also impacted the rental market. Bidding wars are increasingly common as renters who would otherwise buy a home are outbid or unable to find an affordable house, forcing them to stay in the renters market.
Real-estate investors have increased their home purchases in response to high rental competition. Investors purchased a record 90,215 homes in Q3 2021, totaling nearly $64 billion and up 80.2% YOY, the second-largest increase on record. Single-family homes made up nearly three-quarters of those purchases, an all-time high.
“Increasing home prices fueled by an intense housing shortage have created opportunities for investors to reap big profits,” said Redfin Senior Economist Sheharyar Bokhari.
“Those same factors have pushed more Americans to rent, which also creates opportunities for investors because investors typically turn the homes they purchase into rentals and can now charge higher rents.”
The Miami metro had the largest single-family rent increases in September, 25.7% YOY, followed by Phoenix (19.8%) and Las Vegas (15.9%). The smallest increases were in the Chicago metro (2.8%) and Boston (4%), though Boston’s rents rose for the second consecutive month after 14 months of falling.