Single-Family Rent Growth Slows, Signaling Potential Shift in Market Dynamics
Recent data indicates a slowdown in single-family โฃhome rent growth, โฃpotentially reflecting increasing financial โขpressures on consumers. According to โcotality, single-family rent prices โขin Julyโฃ increased 2.3% year-over-year, a deceleration from โthe 3.1% average rise observed in july 2023. This marks a fall below the lower end of the 10-year average range of pre-pandemic โgrowth.
Molly โBoesel, senior principal economist at Cotality, โnoted โคtheโ weakening trend,โค stating, “After a strong start to the year,โ single-family rent growth isโ clearly losing steam. In July, we broadly saw weakeningโค in annualโข single-family rent growth across metro areas and price tiers.” monthly growth in July was just โ0.2% higher thanโค in June, substantially โlower than the ancientโข July average of 0.7%.
While most major metropolitan areas are experiencing โขthis cooling, โฃChicago is an exception, leading theโ nation โขwith 5.1% rent growth, drivenโค by tight inventory and consistent demand. New York City followed with 3.7% growth, โขwith Philadelphia, Washington โคD.C., and los Angeles rounding out the topโ five. Inโ contrast, Dallas and Miami showed the slowest growth, with Miami experiencing no rent growth at all – a stark contrast to theโ 40% annual increase seen in 2022 due to pandemic-related โคmigration.
The slowdown extendsโ across all price โpoints. high-endโ properties saw a 2.9% annual increase, down from 3.2% last July, while low-end rents rose 1.6% annually, a decrease from 2.8% โคin July 2023.
This shift comes afterโ a period where single-family rentals outperformed apartment rentals,โค largely โdue to โa surge in multifamily supply โคand high โฃfor-sale homeโ prices. Many โfamilies,โ traditionally homebuyers, opted for single-family rentals in desirable school districts.
Single-family rental REITs, including Invitation Homes and American Homes 4 Rent, have responded to this demand by developingโฃ more rental communities.โค It remains to be seen whether โคthe recent weakeningโข in โคrentโ growth will lead these REITs to adjust theirโ building strategies. Recent data from Parclโฃ Labs indicates that these large REITs were already โขshifting their focus, selling more individual properties to consolidate holdings into larger, purpose-built rental communities.
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