Demand Rises as Inventory Falls in Single-Family Rental Market

Demand in the single-family rental market continues to expand even as inventory tightens, according to the latest MarketPulse report from CoreLogic. Comparing lease rates, supply, pricing, and the ratio between bid prices and asking prices clearly demonstrates an increasingly tightening market.

“[S]ome of the new demand is being driven by former homeowners who have experienced foreclosure,” CoreLogic stated in its report. As a result, markets experiencing the greatest growth in single-family rental demand are the same markets that were hardest hit by the housing crisis, including Florida, California, and Arizona.
Nationally, single-family leases were up 7% in August year-over-year and have shown a 12% increase year-to-date. The August data is not an anomaly but a growing trend, according to CoreLogic, which reported leasing volumes rising sequentially each month over the last two years.
At the same time, inventory has been decreasing. In August, single-family rental inventory was down 11% from a year earlier. The market held about 2.6 months’ supply in August. A year earlier, supply was at about 3.2 months. Inventory declined sharply this past summer with a strong rise in closings, according to CoreLogic.
Listings are being rented faster. In August, a listing took about six weeks to rent, down from eight weeks a few years ago in 2009. After declining for two years, rental prices have been on the rise since 2011, rising 2% over the year in 2011 and 1% year-to-date in 2012.
CoreLogic expects rental prices to continue to rise throughout the rest of this year and next. Rental prices are generally less volatile than home prices, and home prices have experienced increases of late.
The ratio between listing rent and actual rent paid is another indicator that points to a tightening in the single-family rental market. Two years ago when rental prices were declining and inventory was higher, the spread was about 4%. Today it stands at about 2%. “[A] weak labor market, tight underwriting for owner-occupied properties and elevated foreclosures will ensure continued strong demand for single-family rentals,” according to CoreLogic.