Single-family rent grew 7.5% year-over-year in July 2021, the largest increase since 2005. Here's why this trend is likely to continue.
Home prices aren’t the only thing climbing in 2021.
After a substantial dip early in the pandemic, single-family rent price growth is exceeding pre-pandemic levels and, for single-family homes, reaching its highest level since at least 2005.
According to the latest CoreLogic Single Family Rent Index report, the national rent increased 7.5% year-over-year in June 2021, after increasing just 1.4% the year prior. Rising home prices and dwindling inventory is putting upward pressure on rent growth as more consumers are being priced out of homeownership.
This was especially prevalent for detached single-family rental properties, which saw a 10.5% increase in annual rent growth. Attached properties grew at 4.6%.
Price also played a factor in rent growth. Rent for higher-priced single-family properties grew faster than lower-priced ones.
| Price bracket | June 2021 annual increase | June 2020 annual increase |
|---|---|---|
| Lower-priced (75% or less than the regional median) | 5.3% | 2.3% |
| Lower-middle priced (75% to 100% of the regional median) | 6.4% | 1.5% |
| Higher-middle priced (100% to 125% of the regional median) | 7.1% | 1.5% |
| Higher-priced (125% or more than the regional median) | 9.6% | 1.2% |
Eight metro areas saw a double-digit rise in single-family rent from June 2020 to June 2021. Phoenix-Mesa-Scottsdale, AZ led the way with a 16.5% year-over-year increase in rent.
| Metro area | June 2021 single-family annual rent change | May 2021 single-family median rent price |
|---|---|---|
| Phoenix-Mesa-Scottsdale, AZ | 16.5% | $1,811 |
| Las Vegas-Henderson-Paradise, NV | 12.9% | $1,898 |
| Tucson, AZ | 12.5% | $1,645 |
| Miami-Miami Beach-Kendall, FL | 12.4% | $2,131 |
| Austin-Round Rock, TX | 11.9% | $1,748 |
According to the June CoreLogic Single Family Index Report, runaway rent growth is tied closely to high demand and low supply in the purchase market.
“Rising affordability issues and supply shortages in the for-sale housing market and ongoing demographic pressure from aging millennials have continued to place upward pressure on the single-family rental market — leading to the largest annual rent price increase in nearly 15 years in April 2021.”
The upward pressure may decrease as the purchase market normalizes -- but it certainly will not disappear.
Millennials (the yellow bars) are the largest generation in the U.S. and just now entering the prime homebuying age range of 30-35. The number of people in the peak homebuying age range will increase for at least the next eight years. This wave of millennial homebuyers will continue to fuel demand in near- and mid-terms.
Meanwhile, housing supply is limited due not only to increased demand, but to years of underbuilding following the 2008 housing crash.
While builders are ramping up the pace, they are also facing supply chain issues and inflated materials costs. The housing supply shortage is not easily solved. It will take years, if not decades, to increase supply at a rate that significantly impacts home prices, and by extension, rent.
While record-growth in home prices has been the headline grabber in 2021, rent increases should not be ignored, especially by people deciding between renting and buying.