The single-family rental property market has been one of the hottest markets in commercial real estate in 2018, in certain places such as Dallas, it’s actually better to rent than purchase a home. Let’s take a closer look at where single-family rental properties are growing the most.
The Numbers Behind the Market
According to CoreLogic’s Single-Family Rental Index, Las Vegas has led the nation in year-over-year rent price increases throughout the first half of 2018 and high-end rental prices accelerated from January to June 2018 compared to the low-end cohort.
Of the top 20 metros, Las Vegas boasted the highest year-over-year increase in single-family rents per from January to June 2018, followed by Orlando and Phoenix. Honolulu saw its first year-over-year rent price increase in May 2018 at 1 percent, after seven consecutive months of decreasing year-over-year rent prices.
CoreLogic also found that metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees typically have stronger rent growth. During the first half of 2018, both Orlando and Phoenix saw tremendous year-over-year rent price growth averaging 5.2 and 4.7 percent from January to June 2018.
Increased Interest in Single-Family Rental Property
According to Multifamily Executive, since 2006, the number of Americans living in rental properties has soared to nearly 37 percent, the largest amount since 1965. An analysis by the Urban Institute found that over the past decade, single-family for rent has been the fastest-growing segment of the U.S. housing market.
The high demand for single-family rentals has encouraged many developers to enter the market with a new product: cohesive single-family rental communities filled by niche renters with different lifestyle needs than those who rent apartments.
Factors That are Boosting Single-Family Rent
Industry experts have said that the current economic climate has created the perfect environment for the single-family rental market. Between the tight job market, student debt and buyers struggling to make the down payment, single-family rentals are an alternative for purchasing a home.
With stricter lending terms, many buyers do not have the credit scores to qualify for a mortgage loan which is keeping them out of the buying market. Although many middle-class renters don’t have the money for a down payment, they do have the funds to spend on a rental home.
Another trend that boosts the appeal of single-family rental homes is lifestyle changes such as millennials having children and needing more space than an apartment can offer, but not in the financial situation to be able to purchase a home. Single-family rentals are a great medium choice that millennials have taken advantage of, especially in markets like Las Vegas and Phoenix. According to Rent Café, a little over half of the total number of single-family rental homes in the U.S. market are occupied by families. Although on average single-family rentals are about $1,000 more a month than an apartment, these rentals offer extra space, more privacy and a greater neighborhood feel.