Riverside-San Bernardino-Ontario Experienced the Highest Year-Over-Year Rent Growth in September
- Overall Index pulled down by high-end segment
- Rent prices may be showing some early impacts of Hurricane Harvey
- Of 20 select metros analyzed, San Francisco and Miami were the only two to experience a decrease in single-family rent prices in September
National single-family rent prices climbed steadily between 2010 and 2017, as measured by the CoreLogic Single-Family Rent Index (SFRI). However, the Index shows year-over-year rent growth has decelerated slowly since it peaked early last year (Figure 1). In September 2017, single-family rents increased 2.9 percent year over year, a 1.5-percentage point decline since the growth rate hit a high of 4.4 percent in February 2016. The Index measures rent changes among single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time. Analysis is conducted nationally and for 75 Core Based Statistical Areas (CBSAs).
Using the Index to analyze specific price tiers reveals important differences. Figure 1 shows that the Index’s overall growth in September 2017 was pulled down by the high-end rental market, which is defined as properties with rent prices 125 percent or more of a region’s median rent. Rent prices on higher-priced rental homes increased 2.2 percent year over year in September 2017, unchanged from September 2016. Rent prices in the low-end market, defined as properties with rents less than 75 percent of the regional median rent, increased 4.5 percent year over year in September 2017, down from a gain of 5.3 percent in September 2016.
Rent growth varies significantly across metro areas. Figure 2 shows the year-over-year change in rent prices for 20 select CBSAs in September 2017. Riverside-San Bernardino-Ontario, CA had the highest year-over-year rent growth with an increase of 5.8 percent. Only two CBSAs among this group of 20 showed a decrease in rent prices: Miami-Miami Beach-Kendall (-0.7 percent) and San Francisco-Redwood City-South San Francisco (-0.2 percent). The September 2017 results for Houston are notable with no change in rent prices from September 2016 to September 2017, and it is likely that rents in this market are showing some early impacts from Hurricane Harvey. The year-over-year rent decrease in Houston stopped in September 2017 after 17 consecutive months of declines as Houston rental transactions increased 63.4 percent year over year. A more pronounced impact is expected in Houston in future months.
Rental vacancy rates are available quarterly from the U.S. Census Bureau Housing Vacancy Survey. Figure 3 shows the relationship between rent growth and rental vacancy rates for 36 metro areas that are available for both the CoreLogic Single-Family Rent Index and the Census Vacancy Survey in Q3 2017.
Metro areas with limited new construction and strong local economies that attract new employees tend to have low rental vacancy rates and stronger rent growth. Minneapolis experienced 4.2 percent year-over-year rent growth in Q3 2017, driven by employment growth of 2.9 percent year over year, which was more than double the national growth of 1.4 percent. In contrast, Tulsa, which has been hit with energy-related job losses since early 2015, experienced a 1.4 percent year-over-year decrease in rent prices, according to CoreLogic data.
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