Continued Growth Of Low-End Rental Market Driven By Demand Of Younger Millennials

- U.S. single-family rent prices increased 2.9% year over year in July 2019

- Phoenix had the highest year-over-year rent price increase at 7.2%

Low-end rent prices were up 3.5%, compared to high-end price gains of 2.7%

CoreLogic released its latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas. Data collected for July 2019 shows a national rent increase of 2.9%, compared to 3.1% in July 2018. Low rental home inventory, relative to demand, fuels the growth of single-family rent prices. The SFRI shows single-family rent prices have climbed between 2010 and 2019. However, overall year-over-year rent price increases have slowed since February 2016, when they peaked at 4%, and have stabilized over the last year with a monthly average of 3.1%. National rent growth continued to be propped up by low-end rentals in July. Rent prices among this tier, defined as properties with rent prices less than 75% of the regional median, increased 3.5% year over year in July 2019, down from a gain of 4.1% in July 2018.

Meanwhile, high-end rentals, defined as properties with rent prices greater than 125% of a region’s median rent, increased 2.7% in July 2019, up from a gain of 2.6% in July 2018. Annual growth of the low-end rental market has consistently outpaced that of the high-end since May 2014. According to data collected from the CoreLogic Consumer Housing Sentiment Study (conducted in partnership with RTi Research), continued growth on the low-end could be due to 63% of younger millennials – ages 21-29 – opting to rent over purchasing a home.

For the eighth consecutive month, Phoenix had the highest year-over-year increase in single-family rents in July 2019 at 7.2% (compared to July 2018). Tucson, Arizona and Las Vegas experienced the second and third highest rent gains in July at 5.7% each, while Miami saw the lowest rent increases of all analyzed metros at 1.2%.

Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. Phoenix experienced high year-over-year rent growth in July, driven by the annual employment growth of 2.9%. This is compared with the national employment growth average of 1.5%, according to data from the United States Bureau of Labor Statistics. Orlando, Florida also experienced an elevated annual employment growth of 3.8%, which played a role in its above-average year-over-year rent increase of 3.5% in July. "Rent increases on entry-level properties continued to outpace the rest of the rental market,” said Molly Boesel, principal economist at CoreLogic. “This trend should continue in the near term with strong demand from younger millennials who indicate they prefer to rent rather than own a home.”