New Construction slowdown continues to increase rents for Single Family homes
Through the first quarter of 2025, median single-family home rent prices are up about 41% since before the pandemic, according to a recent report by Zillow. Meanwhile, multi-family rents are up 26% in the same timeframe.
What is causing the increase? Single-family homes have seen a slowdown in new construction, keeping the available supply very low. The outlook on building supply prices and the economy suggests this trend will continue with very little new construction in near term.
Single-family rent growth remains strong amid high demand, as high mortgage rates keep would-be buyers out of the for-sale market, Zillow noted in the report.
Multi-family housing often includes many units or separated dwellings within the same building, whereas a single-family rental is typically defined as a detached house.
The average rent price for a single-family home was up 4.4% from a year ago, Zillow found. Meanwhile, the typical asking rent for a property in a multifamily home was up 2.7% from a year prior.
‘Renters are stuck renting for longer’
The millennial generation — those born between 1981 and 1996 — has had a tough time getting into homeownership.
Rents Increasing (Continued)
The typical first time homebuyer in the U.S. is now 38 years old, an all-time high, according to a 2024 report by NAR.
As homeownership has become more unaffordable, would-be buyers have had to find bigger rental properties to accommodate major life changes, such as getting married, and having kids or pets.
This means many people are staying renters for longer. Zillow found in a separate 2024 report that the median age of renters in the U.S. is 42, and millennials make up about 31% of renters in the U.S. In Zillow’s analysis, millennials were those age 30 to 44 at the time of the survey.
The appeal of single-family rentals, experts say, is a homeownership experience without the same costs. That can be meaningful for buyers who are faced with affordability challenges in the for-sale market. Coming up with the down payment can be a hurdle, as well as navigating high mortgage rates and rising home prices.
The average 30-year fixed rate mortgage are still near 7% per Freddie Mac data.
If you are relocating, you may consider keeping you home and renting to a qualified tenant instead of selling it. As rents increase, your home can be a smart, long-term investment.
If you are not comfortable with screening tenants, local leasing laws and rent collection, consider hiring a property manager. A local property management company will have the experience and knowledge on how to properly oversee your home.