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Single-Family Rental Demand Is Outstripping Supply
Demand for single-family rental housing is outstripping the available supply of homes, and some housing markets that have been hit hardest by the foreclosure crisis have seen rental demand jump by more than 25% in the past year, according to a report to be released Tuesday by real-estate firm CoreLogic .
It shouldn’t be surprising that single family rental demand has picked up in recent years: There are many families who have lost their homes to foreclosure or that can’t qualify for mortgages given tighter underwriting standards.
But the magnitude of rental-demand gains is still eye-opening. Markets that include Port St. Lucie, Fla.; Riverside, Calif.; and Tucson, Ariz., have all seen rental demand jump by 25% over the past year, and 22 of 30 markets tracked by CoreLogic have seen year-over-year leasing gains.
The single-family rental market has attracted a glut of institutional investor capital over the past two years, as firms to seek to build scattered-site property management infrastructure for an asset class that has long been the domain of mom-and-pop owners and smaller investors.
Slightly more than half of all rental units in the U.S., or around 21 million units, are single-family homes. Around four in five of those unit owners are individual investors.
Investor demand for rentals shows little signs of weakening, according to the CoreLogic report. Leasing activity was up 7% from one year ago in August and up 12% from the beginning of this year, even though the inventory of homes for rent is down by 11% from one year ago.
As a result, it would take just 2.6 months to rent the available stock of for-lease homes in August, down from 3.2 months of supply last year and over 5 months in 2007. It took just six weeks for a listing to be rented, which was unchanged from one year ago but down from more than eight weeks in 2009.
Single-family rents, which tend to show less volatility in either direction than home prices, rose by 2% last year and have increased by 1% so far this year, after declining in 2009 and 2010. “While those increases are low, rent growth typically lags home price growth by about 12 months,” writes Sam Khater, senior economist at CoreLogic, in the report. He expects rent growth to increase “at a strong clip” late this year and throughout 2013, though not at the same rate as home prices.
The largest rent increases were found in North Port, Fla.; Cape Coral, Fla.; and Honolulu, where rents increased by more than 6%. But rents also rose in cities such as Houston and Raleigh, N.C., where the economy has fared better and the housing market wasn’t as hard hit by the bust. Large rental increases beyond the housing-bust markets “is indicative of the rising tide of demand for single-family rentals,” wrote Mr. Khater.