Single Family Rents are Soaring in These 13 Cities

You’ll be surprised which two Midwest cities top the list.

Single Family Rents are Soaring in These 13 Cities Earlier this year, many experts predicted that landlords would raise rents in response to continued demand for rental housing among various demographic groups who either cannot afford to or do not want to purchase their own homes. These predictions have proven accurate, with some especially dramatic increases in a few somewhat surprising places.

While the median rent for a typical three-bedroom single family home has increased just 6 percent nationwide since June of 2014, 13 cities have seen double-digit increases, with rents climbing at over 3 times the median rate in two Midwest cities.

First, let’s take a look at the places where dramatic rent increases aren’t actually all that surprising:

  • Austin—10%
  • Houston—12. 5%
  • San Francisco—13%
  • San Antonio—13%
  • Dallas—13.5%
  • Portland OR–13.5%
  • Denver—14%
  • Honolulu—15%
  • Seattle—15%

These are all big cities, where one would reasonably expect a high cost of living, including higher rent increases than seen nationally.

Now for some of the more surprising locations of double-digit rent increases this year:

  • Sarasota FL—15%
  • Greenville SC—17%
  • Des Moines IA—21%
  • Ames IA—22%

Who would have thought that two cities in Iowa, a sleepy state that rarely makes the news, would top the list of rent increases for 2015?

Renter Demographics

According to the latest Census data, there were 14.8 million occupied single family rentals in the US in 2013, a 28 percent increase since 2004. The occupants of these rentals are likely to be white, middle-aged, and living in the center of the city as opposed to the outer suburbs, per a recent report from Harvard’s Joint Center on Housing Studies.

According to the president of Real Property Management (one of the companies that helped supply the rent increase data), single family rentals are increasingly being shared by friends and roommates or by different generations of a family, as many young professionals and middle-class workers are no longer able to afford their own homes—in part due to high rents interfering with their ability to save.

Possible Take-Away for Lenders

In addition to the obvious opportunity rising rents presents for investing in new construction of single family rentals, this trend also opens up another interesting possibility for lenders: 203K loans. These loans, which include financing for both purchase and repair of a home, may be ideal for buyers looking to transition to home ownership from expensive single family rentals. As we’ve mentioned, single family renters are concentrated in city centers, which tend to be older neighborhoods with aging housing stock. Many units may be in urgent need of renovation, and landlords may be reluctant to make this investment themselves, even with rising rents. Single family occupants could qualify to purchase and revitalize this aging housing stock with 203k loans.

At ECL Software, we offer a robust online FHA 203K lending software solution that can help banks and other institutions track, evaluate, and administer these specialized loans and take advantage of this possible opportunity in the market.