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Single-Family Rent Growth Continues Gradual Recovery

This marks two consecutive months with rent growth above 3.0%, signaling a steady recovery from an 18-month period of deceleration.

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Good morning. The single-family rental (SFR) market shows signs of gradual recovery, with rent growth climbing in March. Plus, from 2019 to 2023, rents in ten U.S. cities increased by 20% more than wages.

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Market Snapshot

S&P 500
GSPC
5,307.01
Pct Chg:
-0.27%
FTSE NAREIT
FNER
717.88
Pct Chg:
-0.062%
10Y Treasury
TNX
4.42%
Pct Chg:
-0.014
SOFR
1-month
5.32%
Pct Chg:
0.0%
*Data as of 5/22/2024 market close.

Property report

Single-Family Rent Growth Continues Gradual Recovery

Despite a slight dip in attached single-family rentals, overall rental prices for single-family homes continue to grow.

Gradual recovery: According to CoreLogic’s latest Single-Family Rent Index (SFRI), SFRs rose 3.4% year-over-year in March, matching the previous month’s increase. This marks two consecutive months with rent growth above 3.0%, signaling a steady recovery from an 18-month period of deceleration.

Trending: The median nationwide monthly rent for a three-bedroom single-family home was $2,052 in February. Large coastal urban areas led the growth, with Seattle (+6.3%), New York (+5.3%), and Boston (+5.2%) experiencing the highest year-over-year increases. Conversely, Austin (-3.5%), Miami (-3.2%), and New Orleans (-1.4%) saw annual rent declines.

Zoom in: For the first time in 14 years, attached single-family rentals (townhomes, duplexes, rowhouses) saw a price decline of 0.6%. In contrast, single-family detached homes maintained strong rent growth, indicating potential homebuyers priced out of the market are opting for rentals.

Cash is king: Cash transactions made up nearly 70% of all SFR purchases, indicating strong demand despite a lack of leverage due to high interest rates. Meanwhile, individual buyers relying on mortgages to achieve the American Dream face an increasingly uphill battle for homeownership.

➥ THE TAKEAWAY

Why it matters: The U.S. rental market is adjusting to a surge in supply. The single-family rental market is expected to maintain growth, supported by challenges in the for-sale housing market. With home purchase affordability at a low, detached single-family rentals offer a viable alternative for many.

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✍️ Editor’s Picks

  • Lending kingdom: Andover Properties launched its lending arm with $300M in funding, offering $600M in self-storage loans as the fledgling sector takes flight.

  • Rolling into recession: RealPage warns of a potential ‘rolling recession’ with slowing employment growth in interest rate-sensitive sectors, which may point to deeper economic instability.

  • Broken compass: The now-notorious SoftBank Vision Fund reduced its Compass (COMP) stake to 15% after selling $74.5M in shares as part of a larger divestment plan.

  • Inflation forecast: JP Morgan’s (JPM) Jamie Dimon warns of persistent inflation amid rising deficits, and seriously doubts that we’re in for a soft landing.

  • Real estate Renaissance: Commercial Observer just released its 2024 Power 100 list, honoring top real estate leaders who drove record transactions.

  • Capitalizing on growth: Northmarq expands into investment management by acquiring Morrison Street Capital, boosting its assets to $5.4B across diverse real estate sectors.

🏘️ MULTIFAMILY

  • Too damn high: Slightly more than 1 in 3 NYC apartments is currently considered affordable for tech workers, while entry-level professionals can afford just 2.1%.

  • Senior success: South Florida developer Terry Salzman secured site plan approval for a 6-story, 245-unit senior living facility in Weston designed by Synalovski Romanik Saye LLC.

  • Houses all day: Multifamily rents cooled by 0.8% in April, with the national median rent at $1,396. Meanwhile, single-family rents went up by 3.4%.

  • Rate hike headache: Crystal Asset Management is behind on a $49M loan for a Riverside County property, as rising rates squeeze profits.

  • New wind, old deal: Four Winds Real Estate bought The Knox and its 110 units in Murray Hill for $68M. The property had been used since the pandemic as a temporary housing provider.

🏭 Industrial

  • Storage loan: Self-storage developer 1784 Holdings, led by Shane Albers, secured $36M in bridge financing for a Life Storage (LSI) facility in LA.

  • Futuristic facility: A new JV between Hines (ZHGIIX) and Oaktree broke ground on a 267KSF advanced manufacturing facility in Fremont, CA.

  • Garden State glow-up: Matrix Development Group secured $93M in financing for a nearly 782KSF industrial project in Budd Lake, NJ.

  • Institutional confidence: ERS of Texas plans to invest $200M in industrial real estate funds in fiscal 2024 to balance its CRE portfolio.

  • Balancing the scales: Two Amazon-anchored (AMZN) warehouses totaling nearly 3MSF have hit the market for $225M, with a 10.2-year lease term.

🏬 RETAIL

  • Happier hours: Downtown restaurant and bar traffic during happy hours now exceeds pre-pandemic levels, despite ongoing remote work preferences.

  • Retail rebound: TZ Capital paid $180M for a Madison Avenue property from Thor Equities, or 35% less than the property’s 2013 sale price.

  • Welcome wisdom: Weston developer Terry Salzman secured approval for a 6-story, 245-unit senior living facility on Racquet Club Road.

  • Thanks, Joe: Trader Joe's plans to open a full-service grocery store in DC’s Monroe Street Market development, filling a neighborhood gap.

🏢 OFFICE

  • Location navigation: WeWork nears the end of its bankruptcy period, sorting leases across 170 locations nationwide and keeping most spots in major markets.

  • Delinquent deluge: The Trepp CMBS Delinquency rate rose 40 bps to 5.07% in April, driven by large newly delinquent loans, particularly in the office, retail, and lodging sectors.

🏨 HOSPITALITY

  • Rent standoff: Santa Monica's Third Street Promenade is staring down a 25% vacancy rate, with just 73 of 97 storefronts occupied, as landlords resist lowering rents.

📈 CHART OF THE DAY

From 2019 to 2023, rents in ten U.S. cities increased by 20% more than wages. Nationally, rents grew 10% more than wages during this period. While the data is complex and doesn't lend itself to a simple narrative, one clear trend emerges: rent growth has consistently outpaced salary growth. Thanks to Romain's NY Multifamily Newsletter for the chart!


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