Rents for Lower-Priced Rentals Increased for Fifth Consecutive Year
Mar 12, 2019 11:43:44 AM
US SINGLE-FAMILY RENTS UP 3.1 PERCENT YEAR OVER YEAR IN DECEMBER
Rents increased 3 percent for the full year 2018.
High-end segment rent growth accelerated and low-end segment decelerated in December 2018 compared with December 2017.
Houston had the slowest annual rent increase of the 20 analyzed areas in December.
U.S. single-family rents increased 3.1 percent year over year in December 2018, up from a 2.9 percent increase in December 2017, according to the CoreLogic Single-Family Rental Index (SFRI). The index measures rent changes among single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time. Single-family rents climbed steadily between 2010 and 2018. Annual rent increases have stabilized, fluctuating between 2.7 and 3.2 percent for the past 12 months. Rent increases averaged 3 percent for full year 2018, a pick up from 2.7 percent in 2017.
Using the rental index to analyze specific price tiers reveals important differences. Figure 1 shows that the index’s overall growth in December 2018 was propped up by low-end rentals, defined as properties with rents 75 percent or less of a region’s median rent. Rents on lower-priced rental homes increased 3.7 percent year over year and rents for higher-priced homes, defined as properties with rents more than 125 percent of the regional median rent, increased 2.9 percent year over year. However, rent growth is accelerating for the high end and decelerating for the low end. High-end rent growth was 0.3 percentage points higher and low-end rent growth was 0.2 percentage points lower than in December 2017. Last year marked the fifth consecutive year that lower-priced rents increased faster than higher-priced rents. Full year 2018 appreciation for low-priced rentals was 3.9 percent compared with 2.6 percent for high-priced rentals.
Rent growth varies significantly across metro areas. Figure 2 shows the year-over-year change in the rental index for 20 large metro areas in December 2018. Phoenix had the highest year-over-year rent growth last December with an increase of 6.9 percent, followed by Las Vegas (6.8 percent) and Orlando (5.1 percent). Orlando had the strongest year-over-year employment growth among the 20 metros in December, with job gains of 4.8 percent. This is compared with national employment growth of 1.7 percent. Houston had the lowest rent growth in December, increasing by just 1 percent from the prior year, indicating that the rent hikes following the 2017 hurricane are waning.
 Metro areas used in this report are Core Based Statistical Areas. The SFRI is computed for 75 CBSAs.