According to the latest CoreLogic Single-Family Rent Index, U.S. single-family rents in 2019 grew by an average of 3%, the fastest annual rent appreciation since 2016.
Last year’s pace was slightly faster than the average appreciation of 2018. Molly Boesel, CoreLogic principal economist, attributed the upward trajectory for rents to strong economic growth and a healthy labor market.
With the U.S. economy showing continued strength, Boesel predicted more of the same during the early part of this year.
“Employment growth is expected to remain strong in 2020,” she said. “This, coupled with rental vacancies reaching a 34-year low in the last quarter of 2019, could lead to continued rent increases in the near term.”
Despite the full year’s strong appreciation rate, December 2019 actually saw rent growth ease marginally. Single-family rents rose 2.9% year over year during the month, down slightly from 3% in December 2018. Year-over-year price increases have generally stabilized since early 2019, hovering around 3% each month since.
Overall rent growth continues to be propelled by growth in low-end rentals, or properties with rents of 75% or less of a region’s median rent. Rents for these properties grew 3.4% year over year.
Meanwhile, rents on higher-priced homes — properties with rents of at least 125% of the regional median rent — increased 2.5% year over year this past December. Although the difference in growth rates between the two housing tiers has tapered over time, rents for lower-priced homes have grown faster than those of higher-priced homes since May 2014, suggesting continued supply limitations at the low end of the market.
Among metros tracked by CoreLogic, Phoenix continues to lead the way in terms of year-over-year single-family rent growth, with a gain of 6.7% in December 2019. It’s the 13th straight month that Phoenix has seen the largest annual increase in single-family rents. Two other Southwest metros rounded out the top three, with Tucson, Arizona, at 5.7% and Las Vegas at 5.1%.
Honolulu, on the other hand, had the lowest single-family rent growth among the metros in CoreLogic’s study, increasing by 0.4% from the previous year. Last month, Boesel correlated rent-growth trajectories to regional trends in population growth. Consider, for example, that in 2019, Arizona ranked third nationally in population growth by both number and percentage, while Hawaii saw its population decrease last year.
Boston experienced the largest acceleration in annual rent growth this past December, with rents growing 2.4 percentage points faster than in the same month one year earlier. Orlando had the largest deceleration, with year-over-year rent growth in December 2019 that was 2.9 percentage points lower.