In 2021, rent prices for single-family units climbed at three times the rate as they did in 2020, according to new data released Tuesday by CoreLogic.
An analysis by the business intelligence firm found that annual rent price gains jumped 7.8 percent in 2021 amid a supercharged market, compared to just 2.8 percent in 2020 when the pandemic turned the market on its head.
The intense growth was spurred in part by rising employment and a low supply of rentals, according to Molly Boesel, a principal economist at CoreLogic.
“Single-family rent growth had a record-breaking year in 2021, bolstered by increasing employment and low vacancy rates,” Boesel said.
Rent growth in 2021 hit the highest level seen since at least 2005, when the CoreLogic Single Family Rent Index first started tracking the data. The record was broken in April 2021 at 5.2 percent and continued to grow throughout the year.
While rents are expected to grow at a slightly slower rate throughout 2022, boosted inflation is likely here for the long term, according to Boesel.
“As rents make up one-third of the Consumer Price Index, rapid rent growth helped push up inflation in 2021,” she said. “While rent growth should ease in 2022, inflation may remain elevated for much of this year.”
Another factor leading to the growth in single-family rental prices is the extreme growth in the cost of purchasing a home spurred in part by a hyper-competitive market with low inventory. Many families looking to settle down may not be able to afford the down payment on a house, but they can afford to rent one.
And with mortgage rates rising, it’s likely even more families will be priced out of homeownership in 2022, according to Fannie Mae economists.
Additionally, poor consumer confidence amid rising inflation may be leading to some families holding off on big purchases such as homes.
The report concluded that while home price appreciation will slow throughout 2022, leading to slightly relaxed demand for rentals, rent price growth will remain strong.
According to the report, higher-middle priced rentals grew from 3.2 percent in 2020 to 11.2 percent in 2021, lower middle-priced units grew from 3.3 percent to 12.4 percent, higher middle-priced units grew from 3.9 percent to 12.5 percent, and higher-priced rentals grew from 4.5 percent to 11.9 percent.
Among the 20 large metropolitan areas surveyed for the report, the highest amount of single-family rent price growth was seen in the Miami, Florida area, where rent prices surged 35.7 percent to a median price of $2,373 per month as of Nov. 2021.
Phoenix, Arizona followed at 18.9 percent with the median single-family rental now at 2,090, and Orlando, Florida sat with the third-highest growth with 17.9 percent leaving the median price at $1,798.
That level of growth is consistent with the pandemic-era trend of relocators heading to sun-belt cities with warm temperatures and low tax rates, spurred by the ease of remote work and low interest rates, causing housing prices in those cities to jump as high as 30 percent in some cases.