While home prices have been posting record increases for months, it appears that rents are trying to keep up. CoreLogic says the connection is clear. The company's Single-Family Rent Index, which analyzes single-family rent price changes nationally and across major metropolitan areas, shows rent growth in June was the highest since at least 2005, an annual gain of 7.5 percent. The increase in June 2020 was 1.4 percent.
The company examines the path of single-family rents across four price tiers, and in each, the growth exceeded pre-pandemic rates for the third straight month. In the lower-priced tier of homes, those that rent for up to 75 percent of the regional median, rents increased 5.3 percent in June compared to 2.3 percent a year earlier. The lower-middle tier, with rents from 75 to 100 percent of the median, saw an annual increase of 6.4 percent against only 1.5 percent in June 2020. Higher-middle priced rents, those in the 100 to 125 percent bracket, were up 7.1 percent, up from 1.5 percent the prior June. In the higher-priced tier, those single-families with rents more than 125 percent of the median, rents jumped 9.6 percent. The gain in June 2020 was 1.2 percent.
The company says its recent survey showed that 85 percent of consumers searching for a home said they prefer single-family homes. However, with inventory of homes for sale still near historic lows, many would-be buyers on instead looking for single-family rentals. This is contributing to the dwindling availability and increasing prices of rentals as well. "As space and affordability remain top priorities for renters, we can expect to see a similar trend as the for-sale market - increased migration to less dense and lower cost areas," the report says.
Molly Boesel, principal economist at CoreLogic said, "Single-family rent growth accelerated in June, bouncing back from last year's weak growth. The recovery was even more pronounced for detached rentals, which had rent growth more than double that of attached rentals. Ultimately, for would-be homebuyers who have been either priced out of the market or unable to find a home in today's supply-constrained market, detached rentals are overwhelmingly preferred - and remain in high demand."
Phoenix, which has led all 20 metro areas in the Dow Jones CoreLogic Case-Shiller National Index for home prices for the past two years was also the city with the highest year-over-year increase in single-family rents with a 16.5 percent gain. Some tourist destinations that were hard-hit by the pandemic are also showing strong signs of recovery, with Las Vegas logging the second-highest rent price growth with a gain of 12.9 percent. And while Boston has experienced the largest decrease in 20 metros' rent prices for 11 consecutive months now (with an annual decline of 2.7 percent in June) the area's rate of decline is slowing compared to previous months.