As a result of the coronavirus (COVID-19) pandemic, unemployment rates reached their highest level in 80 years in April, creating economic instability for millions. Income uncertainty and shelter-in-place orders left renters hesitant to seek new living arrangements, including renting and buying. This reality pushed more tenants to extend their current lease contracts another year or month to month. The slowdown in rental demand worked to slow rent prices in April, which reached the lowest annual growth rate since November 2010.
“As the pandemic-induced recession took hold in April, the single-family rent index posted its lowest growth rate in over nine years,” said Molly Boesel, principal economist at CoreLogic. “While disruptions in the economy affect all parts of the housing market, the impact can often be seen in the rental market sooner than the for-sale market. This means changes in rents can foreshadow changes in home prices.”
Despite a slowdown in demand, lower-priced rentals continued to prop up national rent price growth, which has been an ongoing trend since April 2014. However, year-over-year growth among both tiers did slow in April 2020. Rent prices among the low-end tier, defined as properties with rent prices less than 75% of the regional median, increased 3.1% year over year in April 2020, down from 3.6% in April 2019. Meanwhile, higher-priced rentals, defined as properties with rent prices greater than 125% of a region’s median rent, increased 2.3% in April 2020, down from a gain of 2.4% in April 2019.
Among the 20 metro areas analyzed, and for the 17th consecutive month, Phoenix had the highest year-over-year increase in single-family rents in April 2020 at 6.6% (compared to April 2019), more than doubling the national average. Tucson, Arizona, experienced the second-highest rent price growth in April 2020 with a gain of 3.7%, followed by Charlotte, North Carolina, at 3.4%. St. Louis was the only metro area to experience an annual decline in rent prices at -0.1%.
In April, widespread job loss stretched across the country as the effects of the pandemic, and the resulting recession, emerged. However, some areas were hit harder than others, causing a ripple effect for local rental and housing markets. For example, Detroit – a hotspot for the virus – experienced a 24.5% annual decline in employment in April, causing rent price growth to slow from a 3.3% year-over-year gain in April 2019 to just 0.3% in April 2020. The Phoenix market, which has significantly fewer confirmed cases of the virus than Detroit, experienced a minor 0.7 percentage point slowing in annual rent growth rate as employment declined 7.6% locally.
Methodology
The single-family rental market accounts for half of the rental housing stock, yet unlike the multifamily market, which has many different sources of rent data, there are minimal quality adjusted single-family rent transaction data. The CoreLogic Single-Family Rent Index (SFRI) serves to fill that void by applying a repeat pairing methodology to single-family rental listing data in the Multiple Listing Service. CoreLogic constructed the SFRI for over 80 metropolitan areas —including 45 metros with four value tiers—and a national composite index.