With mortgage rates skyrocketing, many families are putting their search for the perfect home on hold and focusing their attention on the rental market.
For families with multiple children, extended family members or those who work from home, a typical apartment or condominium might not satisfy those needs, meaning they’ll need to look for a single-family rental.
The only problem? Those prices are skyrocketing too.
According to Dwellsy, an online home rental platform, single-family home rental prices have increased 28.9% from last year — coming out to about $520 per month.
“One year ago, median asking rent for a single-family home was $1,800 — now it’s $2,320,” said Jonas Bordo, Dwellsy CEO. “Meanwhile, apartment rent has risen just 12.2 percent, with a median asking rent of $1,655.” That 12% price increase is consistent with inflation, Bordo added.
Single-family homes are the most sought-after rental property and the overall inventory for them tends to be much lower than apartments or condos. During the pandemic, renters began to prioritize extra space and privacy afforded to them by renting an entire home, and that drove up demand even higher.
But more recently, inflation and the aforementioned interest rates is driving a lot of prospective homebuyers out of the market and into the rental space while they wait for those rates to come back down to earth.
“Several months ago, 3.5 percent mortgages were commonly available,” Bordo said. “At that price, an 80 percent mortgage on the average home — $342k mortgage on a $428k home — would have cost $1,536 per month. At current rates, that same mortgage now costs $2,345 —more than $800 more per month.”
In California, many cities top the list of highest median price for a single-family home rental.
At the top is Santa Barbara, historically one of the most sought-after and competitive housing markets in America. But, surprisingly, rental prices have actually gone down since last year in the American Riviera. Still, the city tops the list.
Below that, the next four highest median rent price for a single-family home are all in California. Los Angeles ranks third on the list, up 20% from last year.
The most expensive cities in America for single-family rental homes are listed below:
|Rank||Metropolitan Statistical Area||Median Single-Family Home Asking Rent, October 2022||Change in Single-Family Home Asking Rent Since October 2021|
|1||Santa Barbara, CA||$3,800||– 22.8%|
|2||San Jose, CA||$3,667||+ 6.3%|
|3||Los Angeles, CA||$3,599||+ 20.0%|
|4||Salinas, CA||$3,550||– 2.7%|
|5||San Francisco, CA||$3,495||+ 16.5%|
|6||Austin, TX||$3,210||+ 25.9%|
|7||Oxnard/Thousand Oaks, CA||$3,200||+ 10.3%|
|8||San Diego, CA||$3,195||+ 10.4%|
|9||Naples, FL||$3,016||– 18.5%|
|10||Seattle, WA||$3,010||+ 20.4%|
If you’re looking to save money or waiting to buy a home until interest rates go down, Bordo says an apartment will probably be “kindest to your wallet.” Renting tends to be less expensive than owning, with landlords picking up much of the expenses that come with homeownership.
On a positive note, he says the highest rent prices seem to be in the rearview. During September and October, the asking price on rents across all property types declined, Bordo said.
“I expect to see more moderate pricing in the year ahead,” he added.