Selma Hepp, Chief Economist at CoreLogic, reports a slowdown in year-over-year rent growth for both multifamily and single-family rentals. In July 2023, the national rent growth for single-family rentals was 3.1%, marking a three-year low according to CoreLogic’s Single-Family Rent Index (SFRI). Hepp attributes this trend to lack of affordability and households relocating back to their pre-pandemic locations.
The pandemic had initially caused an increase in rents in areas with affordability, good weather and outdoor amenities such as Miami, Las Vegas and Austin. However, these markets are now experiencing negative year-over-year rent growth due to the “what goes up must come down” effect after seeing increases of up to 40% since early 2020.
On the other hand, cities like St. Louis and Chicago saw little rent growth during the pandemic but are now showing strong annual increases at rates of 7.3%. This is due to their more affordable rental options coupled with strong job markets.
Hepp emphasizes that this deceleration does not indicate weakness in the sector but rather an adjustment towards aligning rents with local incomes after significant appreciation during the pandemic period. She predicts that SFR rents will continue decelerating for the rest of this year before returning back within its long-run average range of 3-4% annual growth rate.
Demand for single-family rentals remains high as buying a house has become more expensive than it used be while existing inventory remains low – making SFRs an attractive option especially among those who have recently relocated or are still unfamiliar with local neighborhoods they may want buy into eventually.
