Key Highlights
- According to CoreLogic’s Single-Family Rent Index, tenants have shifted to low-density single-family homes
- Multi-family prices down approximately -10%, the first annual decline since Great Recession
- Single-family home rentals have had annual increases of 5 – 7%
Not only have tenants become homeowners sooner rather than they had anticipated due to the COVID pandemic, tenants living in multi-family buildings have become tenants living in single-family rental homes since the pandemic ‘s onset.
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Approximately one-third of American households are renters. At the onset of the COVID pandemic in March 2020, a time when applications for rental homes generally increase, applications for rental homes plummeted some -42% compared to one year ago during that same time period. Once shelter-in-place orders were relaxed, applications for single-family rental homes picked up…so much so that by the end of May, applications by prospective tenants for rental homes caught up to the same pace as the year before. Those applications continued at that accelerated pace throughout the remainder of 2020.
What changed during the pandemic year was where and the type of rental property prospective tenants were applying to rent. Prospective tenants preferred renting low-density single-family homes, rather than renting in high-density apartment buildings. In fact, according to CoreLogic, vacancy rates increased in multi-family apartment buildings by -1.2% nationwide in Q3 2020 and landlords responsible to fill those vacancies were offering prospective tenants price and amenity concessions in order to attract new tenants or keep existing tenants.
Meanwhile, CoreLogic’s Single-family Rent Index jumped +2.1% in Q3 2020.
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Bottom line? Multifamily values dropped some -10% in Q2 2020 while CoreLogic’s Home Price Index for rental homes that are usually priced between 75% and 100% of median single-family home prices increased +5% in Q2 and +7% in Q3 2020.
In narrative terms, the onset of the COVID pandemic in March and April of 2020 temporarily kept tenants at a standstill. Once shelter-in-place orders relaxed, tenants chose to move to single-family rentals even if they had to pay higher monthly rental payments to do so. CoreLogic predicts that such shifts in tenant preferences will be long lasting…all at the expense of multi-family rental buildings.
Thanks to CoreLogic.
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Also read: Post-COVID Housing Market – Part I – Real Estate Transactions Go Virtual, What Might Happen in New York Real Estate in A Year of Two?, “Any Crisis Encourages Russians to Buy Real Estate”
