CoreLogic's latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas, shows a national rent increase of 3.3% year over year in February (just before the COVID-19 outbreak in the US ramped up), up slightly from a 3% year-over-year increase in February 2019.
National rent price growth in February 2020 marked the highest annual gain since August 2016. However, as consumers contend with widespread unemployment in the wake of the coronavirus (COVID-19) outbreak, there may be a downshift in demand in the medium-term.
"Single-family rents were on the rise early this year, prior to the COVID-19 outbreak across the country," said Molly Boesel, principal economist at CoreLogic. "In the coming months, the virus' impact on the rental market will become more apparent. Uncertainties surrounding job security and shelter-in-place mandates could lessen rental demand in the near term. However, as we look ahead to an economic recovery, consumers may begin considering single-family rentals over multifamily options to provide more space for at-home offices and distance from other housing units."
Low rental home inventory, relative to demand, fuels the growth of single-family rent prices. The SFRI shows single-family rent prices have climbed between 2010 and 2020. However, overall year-over-year rent price increases have slowed since February 2016, when they peaked at 4.2%, and have stabilized at around 3% over the past year.
Lower-priced rentals continued to prop up national rent growth in February 2020, which has been an ongoing trend since April 2014. However, the gap between low- and high-end price gains narrowed in February. Rent prices among the low-end tier, defined as properties with rent prices less than 75% of the regional median, increased 3.6% year over year in February 2020, down from a gain of 4% in February 2019. Meanwhile, higher-priced rentals, defined as properties with rent prices greater than 125% of a region's median rent, increased 3% in February 2020, up from a gain of 2.6% in February 2019.
Among the 20 metro areas shown in Table 1, and for the 15th consecutive month, Phoenix had the highest year-over-year increase in single-family rents in February 2020 at 6.2% (compared to February 2019). Seattle experienced the second-highest rent price growth in February 2020 with gains of 6.1%, followed by St. Louis at 5.4%. Detroit was the only metro to experience an annual decline in rent prices at -2.2%.
Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. Phoenix experienced the highest year-over-year rent growth in February 2020, driven by annual employment growth of 3.2%. This is compared with the national employment growth average of 1.6%, according to data from the United States Bureau of Labor Statistics. Though employment growth remained strong in February 2020, March marked a turning point as the national emergency declaration catalyzed widespread job losses and furloughed employees. This has disrupted the typical rental demand and supply dynamic, which will ultimately impact rent growth in the coming months.