House for rent in Corona del Mar, California.
Scott Mlyn | CNBC
Demand for single-family rental homes is skyrocketing, with prices reaching record levels as Americans begin to recover from two years of the pandemic and return to big cities.
Single-family rents rose a record 12.6% year-on-year in January, according to a new report from CoreLogic. This compares to a 3.9% growth in January 2021.
Every major market saw growth, but the Sunbelt cities saw some truly staggering numbers.
For example, single-family rent in Miami rose 38.6% from 2% in January last year. Orlando, Florida, and Phoenix were next in line, with gains of 19.9% and 18.9%, respectively, as Americans continued to migrate to warmer parts of the country. The Washington, D.C. area saw the lowest year-over-year increase in rental prices, but they still rose 5.6%.
“Single-family rent growth extended its record price growth streak to 10 consecutive months in January,” said Molly Boesel, chief economist at CoreLogic.
The demand for single-family rentals is so high in part because the market for potential homebuyers is so tight. Not only are house prices up 19% year-over-year, but the number of listings is still historically low. This means that the homes that are listed are often sold within weeks, if not days.
According to the report, rent growth is strongest in the middle of the market. CoreLogic looked at four levels of rental prices and found the weakest increase at the edges:
- lower price (75% or less than the regional average): 12% up from 3% in January 2021
- Prices below average (from 75% to 100% of regional median): up 13.3% from 3.2% in January 2021
- Above average price (from 100% to 125% of the regional median): up to 13.4%, from 3.6% in January 2021
- More expensive (125% or more than the regional average): 12.2% up from 4.5% in January 2021
Rents for apartments also continue to rise, but this growth is slowing down a bit as more offers enter the market to meet demand.
But this does not apply to the single-family rental market. While more builders and investors are opting for rental projects, inventory is still low and construction is hampered by supply chain disruptions and labor shortages in the industry.