Rent-price growth settles near pre-pandemic rate

Rents for single-family properties grew at its slowest pace in almost three years with prices across all levels cooling by approximately 10%, according to new research from CoreLogic.

Rents headed upward by 3.3% on an annual basis in June, but down from a 13.4% surge 12 months earlier in the midst of a hot 2022 market. June's figure inched down from the previous month's 3.4%, which represented a return to the historical rate seen in the decade before the pandemic, the real estate and data analytics provider said. Yearly growth of single-family rents has fallen for 14 consecutive months.

"Annual single-family rent growth has returned to its long-term, pre-pandemic rate," said Molly Boesel, CoreLogic principal economist in a press release. 

Rent growth slowed by similar rates across all price tiers, with properties going for 75% or less than the regional median — dropping to 4.9% from 14.3% in June 2022. Rents at 75% to 100% of median increased by 3.9% compared to 14.5% a year earlier.

Similarly, rental properties at 100% to 125% above regional medians saw prices grow 3.5%, slowing from 14.2% year over year. Higher-priced rents at more than 125% of median increased by 2.3%, down from 12.2%.

Lower-priced rentals continue to see more demand and thus greater annual gains than their higher-priced counterparts, according to CoreLogic's data. Inflation, combined with the decline in housing affordability amid rising rates, also are leading to higher demand and applying upward pressure on the lower end of the rental market, a finding echoed in a recent report from Moody's Investors Service. 

Among individual markets, Chicago recorded the highest annual rent-growth rate at 6.6%, followed by Boston at 5.9%. Orlando, Florida, where rents rose by 5.5%, landed in third. On the other end, rents in Las Vegas decreased by 1.2% in June.

However, a noticeable difference in the pace appears in between attached and detached units. In June, rents for attached single-family rentals, which include townhomes and row houses, accelerated 4% year over year, compared to a 2.6% increase for detached homes.

"This is historically not the case, as both housing types tend to rise at the same pace. However, while rent growth for attached properties lagged that of detached properties in 2020 and 2021, it has outpaced the latter in 2022 to 2023," Boesel said, adding the trend would likely continue as the market balances.

Rent prices are often seen as an indicator of economic trends, with their movements influencing monthly inflation figures. As rent growth slowed over the past year, the Consumer Price Index has also decreased. In the most recent CPI report from July, inflation rose year over year by 3.2%, with shelter costs contributing to much of the increase, according to U.S. government sources.