May 27, 2019
What is Driving Growth in Rental Prices of Single-Family Homes?
The CoreLogic Single-Family Rent Index released in February assessed the trends in single-family rental pricing over the course of 2018 and compared these to the years previous, both in the nation at large and in twenty individual metropolitan areas. Nationally, the single-family rental price increased by 3.1 percent year over year as of December, which means that the increase of rates grew from 2017, when the rate was 2.9 percent over 2016’s growth.
Since 2010, single-family rental prices have increased overall each year in the United States. The rate of this increase naturally depends on the particular locations in which the rental housing is found, and the economic conditions of a given place. For example, the highest rate of single-family housing rental increase occurred during 2018 in Phoenix, Arizona, at 6.9 percent, followed closely by Las Vegas, Nevada, whose rate of increase was 6.8 percent. Our service area of Orlando, Florida experienced the third highest rate increase, at 5.1 percent over 2017. In each of these markets there has been a relatively low rate of new construction, with low rental vacancies but strong local economies with good job prospects.
The overall national average of 3.1 percent is broken down, however, into high-end and lower-end housing, and here we see a discrepancy. While the high-end price gains were up only 2.9 percent in 2018, lower-end housing saw a greater increase of 3.7 percent—which made 2018 the fifth year in a row that low-end rate gains outpaced high-end rate gains.
What drives the rate of rental price is, generally speaking, the simple economic law of supply and demand. The higher growth rate of low-end single-family rental housing over that of the higher-end indicates that, while demand remains high for housing in both echelon, the demand for low-end housing is higher—a trend that may in fact be exacerbated by the rising prices, as higher prices for housing creates a barrier to entry for those who cannot afford it, creating further demand for even lower-end housing—while new construction of such housing takes a while to play out.
If you are looking to buy a home rather than to rent, or if you are an investor looking to purchase properties for rent, give us a call. At Topouzis & Associates, P.C. we utilize our considerable expertise ensure our clients are conveying and purchasing property title clear of judgments and defects. We also help our clients put into place a good policy of title insurance to make certain they don’t get surprised by any nasty lurking issues with a property. Contact us if you’d like us to do this for you.