“As we begin 2017, it continues to look bright for single-family rental investors,” said Wally Charnoff, CEO of RentRange. “Compared to the Q3 2016 change in rent, we are seeing the percentage change begin to lessen while rents continue to increase, which should ultimately stabilize demand, keeping vacancy rates down. It remains important for investors to look at stability within a market, focusing on the market’s activity over time to ensure there is a good balance—low historical volatility with a current upswing.”
According to RentRange’s ranking of the top 25 U.S. metro areas, the McAllen-Edinburg-Mission, Texas, area took the No. 1 spot for year-over-year rent increases, with a 12.9 percent jump from 2015.
Next on the list was Cape Coral-Fort Myers, Florida, which saw a 10.9 percent jump, and Portland-Vancouver-Hillsboro, Oregon/Washington, which saw a 10.6 percent hike. Denver-Aurora, Colorado, and Seattle-Tacoma-Bellevue, Washington, rounded out the top five.
The slowest rent growth was seen in Orland-Kissimmee-Sanford, Florida, which rose just 4.8 percent over the year. Lakeland, Florida; Charleston-North Charleston, South Carolina; Milwaukee-Waukesha-West Allis, Wisconsin; and Myrtle Beach-Conway-North Myrtle Beach, South Carolina, were also among the slowest, all seeing 5 to 5.4 percent growth.
Though it wasn’t one of the slowest markets for rent growth, San Francisco did see its position drop over last year’s. This could spell improving affordability for the market.
“While rents remain high in the Bay Area, San Francisco dropped several positions, indicating that the year-over-year rent change was not as significant as seen in past years,” the report stated. “Comparatively, San Jose made the list as a new addition in Q4 2016.”
RentRange also identified the average vacancy rates for the top 25 metropolitan areas. The highest rates were seen in the Southeast; Myrtle Beach and Charleston, South Carolina, saw a 20.4 percent and 10.5 percent vacancy rate, respectively.
“In these areas, builders and investors may need to compete for a limited number of renters,” the report stated. “An oversupply of new properties can drive up the vacancy rate and eventually push rental rates down. This scenario is currently happening in Myrtle Beach, where more than 3,100 new homes were built in 2015, a 94 percent increase compared to two years earlier.”