Based on CoreLogic's latest Single-Family Rent Index
(SFRI), which analyzes single-family rent price changes nationally and across 20 U.S. metropolitan areas, a national rent increase of 1.7% year over year was recorded in May 2020, down from a 2.9% year-over-year increase in May 2019.
In early 2020, in the months leading up to the coronavirus (COVID-19) pandemic and resulting economic crisis, rent price growth had stabilized at an annual average of 3%. However, growth dramatically slowed in May, falling to its lowest level since July 2010. By comparison, in February 2008 -- two months into the Great Recession -- annual rent price growth stood at 1.8% and did not decline until eight months later in October 2008.
Despite local economies beginning to open back up in May, rental demand continued to be impacted by unprecedented unemployment rates and stay-at-home directives, which contributed to the slowing in rent prices.
"Single-family rent growth slowed abruptly in May as the nation felt the full impact of the economic crisis caused by the pandemic," said Molly Boesel, principal economist at CoreLogic. "Some metro areas, especially those that depend on tourism, were hit hardest by job losses. With unemployment rates predicted to remain high through the end of the year, we can expect to see further easing in rent growth as the economy struggles this year."
To gain an accurate view of single-family rental prices, CoreLogic examines four tiers of rental prices. While prices slowed across all tiers in May, the gap between the low-end and high-end tiers widened further compared to previous months, as prices among high-end rentals dropped significantly in the wake of widespread unemployment. In May 2020, the national single-family rent growth across the four tiers, and the year-over-year changes, were as follows:
- Lower-priced (75% or less than the regional median): 2.8%, down from 3.5% in May 2019
- Lower-middle priced (75% to 100% of the regional median): 1.9%, down from 3.1% in May 2019
- Higher-middle priced (100% to 125% of the regional median): 1.6%, down from 2.8% in May 2019
- Higher priced (125% or more than the regional median): 1.3%, down from 2.5% in May 2019
Among the 20 metro areas shown in Table 1, and for the 18th consecutive month, Phoenix had the highest year-over-year increase in single-family rents in May 2020 at 6% (compared to May 2019). Tucson, Arizona, experienced the second-highest rent price growth in May 2020 with gains of 3.5% followed by Charlotte, North Carolina, at 2.9%. Honolulu, which was hit hard by the collapse of the tourism market, was the only metro to experience an annual decline in rent prices, dropping 0.4%.
U.S. unemployment rates remained elevated in May. However, some areas of the country are continuing to experience higher rates of job loss -- adversely impacting rental demand and slowing rent price growth. For example, Detroit, a hotspot for the virus, experienced a dramatic, 19.9% decrease in employment, forcing local rent price growth to remain stagnant in May 2020, compared to the year prior. Meanwhile, Phoenix's employment declines were relatively minimal in May, where rent growth remained strong. As regions like Florida, Texas and Arizona grapple with a resurgence of COVID-19 cases, we may expect to see a more significant impact to rent prices on the local level.