April figures for US single-family rents point to the highest rise in 15 years. Rental rates rose by over 5% across the country with some metro areas registering double-digit increases. Demand in the single-family market continues to mount in tandem with dwindling supply in the resale market.
Biggest increase in 15 years
The latest Single Family Rent Index from CoreLogic reveals the strong demand within the US market. In April this year, single-family rental rates went up by 5.31% in the year. The figure more than doubles the year-on-year increase registered in April 2020 (2.4%).
Detached US single-family rents saw a considerably higher rise with a 7.9% increase in 12 months. Analysts attribute the bigger increase to demand for more space and better amenities found in detached single-family homes.
On the other hand, attached rental properties experienced a rise of 2.2%, similar to the rent growth seen in 2020.
Double-digits for some US single-family rents
Some parts of the US easily exceeded the national increase of 5.31%. Single-family rentals in Phoenix, for example, went up by 12.2%, the highest in the country. Tucson saw a 10.6% increase.
Other metro areas, however, saw a decrease in rental rates. This was the case in Boston where single-family rents dropped by 5.9% in the year, the biggest fall in the country.
“While rent growth slowed last April at the start of the pandemic, the rate of rent growth this April was running above pre-pandemic levels, even when compared with 2019, and shows no signs of diminishing,” said Mollye Boesel, Principal Economist at CoreLogic.
Supply shortages push demand
The US property market is currently facing an acute supply deficit. In many areas of the country, inventory levels sit at rock-bottom levels – for example, in Florida in April, supply stood at just 1.1 months for single-family homes.
Lack of supply isn’t the only issue facing would-be buyers. Rising prices have pushed many out of the market and affordability is now a major obstacle. Between them, the two factors mean that many buyers are forced to rent instead.
The rental market also presents issues – CoreLogic points to “ongoing demographic pressure from aging millennials” as one of them. And the result is the largest annual rent price increase in nearly 15 years.
Potential for buy-to-let investment
The latest figures for US single-family rents confirm the strong potential for solid returns in the buy-to-let market. Demand for property continues to be high and as a result, supply shows no signs of returning to a more balanced level.
Single-family homes with private outside space are in particularly short supply in most metro areas in the US. As CoreLogic points out, the rate of rent growth in the US is likely to continue on its upward trend for a while yet.