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High mortgage rates and rising asking prices have dissuaded many people from owning their own home in recent years, opting for single-family rentals. Demand for single-family homes has skyrocketed and supply has often been low, but that trend may be changing.
HouseCanary has released a report on the state of the SFR market for the first half of the year, showing that inventory and days on market are increasing. Inventory for the first half of the year increased by 16.7% nationwide, while days on market increased by 15.4%.
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Rental homes stayed on the market the longest in the South. Eight of the 10 markets with the highest inventory increases were in the South. The market with the largest increase was the Greenville-Anderson-Mauldin region of South Carolina, where days on market more than doubled to 76 days. A similar trend is evident in inventory. All of the 10 places with the highest inventory increases were in the South. Four of those were in Florida, with the Cape Coral-Fort Myers region seeing the largest increase.
Good news for tenants in some markets
Rental prices also appear to be stabilizing. Nationwide, rents are up 2.3% year-over-year. At the end of the first half of the year, the national average rent was $2,444. Rent prices for three- and five-bedroom apartments rose the most, by 2.59% and 3.06%, respectively. “People are still choosing to rent instead of buying a home to free themselves from the long-term financial commitments of buying. In addition, interest rates remain at multi-year highs, further limiting buying opportunities,” said Brandon Lwowski, senior director of research at HouseCanary.
While rent increases were spread across the country, rent declines were concentrated in Florida, with six of the top 10 markets in the Sunshine State seeing rent declines. California continues to have the most expensive markets for SFRs, with the average price in the San Jose-Sunnyvale-Santa Clara area being $5,201.
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The Miami-Fort Lauderdale-West Palm Beach region of Florida is still in the top 10 with a median price of $4,205 per month, but was also one of the markets that saw a big 6.2% drop. Chris Stroud, co-founder and head of research at HouseCanary, noted that while the South saw increased migration during the pandemic, driving real estate development, that trend appears to have shifted. “Florida is the perfect case study for this, as the state saw the largest price increase between 2021 and 2022, but our recent report showed the opposite trend, with the state seeing the largest price decline in the first half of this year.”
People are still moving to Florida, but there are signs that the pace of migration is slowing. The Florida Chamber of Commerce is forecasting between 225,000 and 275,000 new residents in 2024. On the sales side, inventory is also increasing in several markets. In July, Nick Gerli, CEO of Reventure Consulting, said home prices in Tennessee, Georgia and Florida were 30% overvalued compared to their long-term norms.
Several factors could influence what comes next. If the inventory of homes for sale remains high and mortgage rates fall, some markets could see a migration from renting to owning. However, there will always be renters who either can’t afford a down payment or need the flexibility of a rental property. For rental property owners, this is a reminder that focusing on a single market can be risky. HouseCanary’s data doesn’t suggest a massive shift away from single-family rentals, but it does show that as the economy evolves, not all markets are the same.
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This article, “Florida is the case study,” says executive on changes in single-family rental market, originally appeared on Benzinga.com
