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Despite record unemployment, calls for rent cancellation, and concerns about widespread evictions, the single-family rental market is still thriving, according to the National Home Rental Council’s third quarter 2020 market index report released on Monday. The index reached 74.4 out of 100, marking the second consecutive quarter of record highs.
The NHRC Single-Family Rental Market Index measures the market on a scale of 0 to 100, with scores under 50 signaling a weakening market and scores above 50 signaling a strengthening market. The score is based on leasing activity, household occupancy and anticipated demand.
“In the third quarter, the single-family rental home market continued to see robust demand from new residents adjusting to the realities of working and schooling from home,” NRHC Executive Director David Howard said in a press release. “For many Americans, a home is no longer simply a place to live.”
“A home has become both a place of business and a place of learning,” he added. “Single-family rental homes often provide an affordable and flexible option to meet the needs of families and individuals in search of quality housing.”
Howard said the Q3’s robust performance is due to city dwellers’ mass exodus toward the suburbs during the spring and fall, which pushed the overall market occupancy rate to 97 percent and increased leasing speeds for 53 percent of landlords.
“According to the third-quarter survey, 59 percent of new single-family rental home residents relocated from urban residential environments, a likely source of the ongoing demand for single-family rentals which tend to be located in more suburban and suburban-like geographies,” he explained.
Even with heightened demand and slim supply, Howard said single-family rentals are still the more affordable option for the majority of Americans. Although NHRC’s report didn’t disclose specific rental affordability statistics, CoreLogic’s latest round of reports supports Howard’s assertion. In September, the median single-family rent increased 2.5 percent year-over-year, while median single-family home prices increased 7.9 percent.
“Even with elevated levels of demand; however, the average rental rate for single-family rental homes remains below the average monthly mortgage cost for owner-occupied single-family entry-level homes,” he said.
NHRC isn’t the only group predicting the long-term strength of the single-family rental market. In August, RCLCO Real Estate Advisors market analysts said increased demand for single-family rentals could lead to a decade of undersupply in the for-sale market.
“The demand for new build-to-rent product is being driven by demographic shifts resulting in more households being in the stage of life where single-family housing better suits their needs, and the housing affordability challenges that are keeping many households, especially first timers, out of the for-sale market,” the RCLCO’s report read.
“Although some are forecasting home price declines as a result of the COVID-19 recession, the ratio of household incomes to median home prices over the past two years has been at record highs, continuing the decreasing affordability trend that only paused during the recovery [after the Great Recession].
“Given strong household growth and a lower than historical ratio of housing production to that growth, recessionary impacts to home prices are likely to be short-lived and a lasting return to general housing ‘affordability’ is unlikely any time soon,” the report concluded.