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SFR Rent Growth’s Ongoing Decline
Rent growth for single-family rentals in the U.S. continued slowing in February 2023, dropping to 5% according to CoreLogic’s Single-Family Rent Index. This metric represents the 10th straight month of rent growth decline, according to the report.
Molly Boesel, principal economist at CoreLogic, told Connect CRE that the results weren’t too surprising. “The slowing in rent growth is a return to the longer-term trend that has been expected,” she explained. The slowing could also be due to renters who are unwilling to pay rate increases of the same rate as a year ago.” She added that supply increases could also be placing downward pressure on rent growth.
The report noted that western metros that had reported large rent price increases in February 2022 continued the trend. For instance, Phoenix and Las Vegas ranked in the top five for annual rent price growth at 18.2% and 16.6%, respectively last year. Yet this year, those two metros ranked at the bottom for increases.
Additionally, year-over-year changes for the SFR tiers were as follows:
- Lower-priced (75% or less than the regional median): 7.7%, down from 12.7% in February 2022
- Lower-middle priced (75% to 100% of the regional median): 5.9%, down from 13.8% in February 2022
- Higher-middle priced (100% to 125% of the regional median): 5%, down from 13.8% in February 2022
- Higher-priced (125% or more than the regional median): 3.5%, down from 12.8% in February 2022
One surprise in the report was that St. Louis topped the list for rent growth in February. But Boesel noted that the St. Louis metro’s rent growth has been slow and steady, averaging between 5% and 8% over the past year. Furthermore, St. Louis (and Charlotte, NC) tend to have lower-than-average monthly rents, compared to other metros.
“For an extreme example, look at Miami, which had rent growth of 30-40% in the first half of 2022,” she added. The Miami rent growth slowed to 5% during February.
In terms of outlook, Boesel indicated there wouldn’t be much change. SFR rent growth will continue to slow, returning to the long-run trend of about 3%. “As monthly rent prices increase, renters may find they are unable to pay higher prices and move to less-expensive properties, thus making it difficult for landlords to continue raising prices at a high rate.” Boesel added.
And if a much-anticipated recession kicks in this year, this “would also lower demand for rentals, which would slow rent growth,” Boesel said.
- ◦Lease
- ◦Economy
