Single-Family Home Rent Sees Largest Year-over-Year Increase in 15 Years
According to CoreLogic, the highly respected California-based corporation which provides financial, property, and consumer information analytics, the US rental market is soaring. Single family rentals increased an incredible 5.3% year-over-year in April (the latest figures available). The rent growth of detached properties rose three times as much as attached properties. This represents the greatest increase since May 2006 – far above pre-pandemic levels.
On a micro level, low priced rent tiers (75% of the regional median) increased 3.9% year over year in April 2021, up from 3.2% in April 2020. Higher priced rentals (greater than 125% of the regional median) increased 6.1% during the same one-year time frame.
As demand for more space is increasing, detached rentals are accelerating at a mind-boggling 7.9% year-over-year in April, as compared to a slower growth rate of 2.2% for attached properties.
Of the 20 large metropolitan areas in the study, only Chicago and Boston showed declines.
While rent growth slid in April of 2020 due to the onset of the pandemic, that pent up demand has blossomed. During the pandemic, most folks didn’t think of moving, as their primary concern was caution concerning catching the virus and worries about whether their jobs will be there when the pandemic ended. Now, with the pandemic under control, people are ready to make the necessary housing decisions, whether it be upgrading or downsizing. A second factor which pushed prices higher was the severe slowdown in home construction during the pandemic year. When demand is high and availability is low, prices will inevitably rise. Additionally, the price of raw materials for home construction surged (such as wood and metals), leading to higher prices for homebuyers.
Logically, when home prices rise sharpy, many buyers are priced out of the buying market, and forced to rent due to financial considerations. These factors led to the largest rent price increase in 15 years. CoreLogic believes these factors will persist in the near term, leading to strong rent growth this year.
A separate survey by CoreLogic found that 49% of millennials and 64% of baby boomers “strongly prefer” to live in a single family, stand alone homes, adding yet more upward price pressure for these properties.
What About Naples?
According to the Naples Multiple Listing Service, while the above market data is showing a sharp increase year over year, we are actually seeing an even larger increase in Naples. The average rental price in Naples in 2019 was $2,054 a month while the average rental price in June 2021 is $2,646 a month. That's represents an incredible 29% increase in 2 years. And most of this increase has occurred in the last couple of months due to the resale housing shortage. Buyers who cannot find (or afford) a home to purchase are being pushed into the rental market, resulting in a rental shortage, and therefore, price increases.