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If you’re in the market for a rental property that offers a better deal, it might be time to broaden your search criteria. According to a recent Zillow report, rental prices for single-family homes have surged by around 41% since the onset of the pandemic. In comparison, rents for multi-family units have climbed 26% during the same period.
Thanks to a construction boom in multi-family buildings, apartment rental prices across the U.S. have remained relatively stable, leading some economists to speculate that by 2025 we might be entering a “renter’s market.” However, the story is different for single-family rentals, where construction hasn’t kept pace, resulting in limited supply. Zillow’s report indicates that demand for single-family rentals is still high, fueled by steep mortgage rates that are discouraging potential buyers from entering the housing market.
While multi-family housing consists of several units within the same building, single-family rentals are generally standalone houses.
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In January, the average asking rent for a single-family home reached $2,179, marking a 0.3% increase from the previous month and a 4.4% increase from the previous year. In contrast, the typical rent for a multi-family property was $1,820, a 0.2% rise from the month prior and a 2.7% increase year-over-year. This rent differential between single-family homes and multi-family units is the largest Zillow has recorded since it started tracking these figures in 2015.
Despite the limited stock of single-family rentals in comparison to multi-family options, “demographics play a huge role here,” says Jessica Lautz, the deputy chief economist at the National Association of Realtors.
If you’re not ready to purchase a home yet but need the additional space, here’s what it means for you to face the high cost of single-family rentals.
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Renters are hanging onto their rental status longer than ever.
The millennial generation, those born from 1981 to 1996, struggles significantly to become homeowners. According to a 2024 NAR report, first-time homebuyers in the U.S. now average 38 years old, the oldest on record.
“Renters are stuck renting for longer,” remarks Zillow economist Orphe Divounguy.
Consequently, many individuals are renting for extended periods. A separate 2024 Zillow report states that the median age of renters in the U.S. is 42, with millennials constituting roughly 31% of the rental population. For this analysis, millennials were defined as those aged 30 to 44 at the time of the survey.
As homeownership has drifted into “unaffordable and out of reach” territory, millennials are turning to larger rental spaces for their growing families or other household needs, like marriage or pet ownership.
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What draws many to single-family rentals, according to experts, is the feel of homeownership minus the typical expenses. This option becomes important for those grappling with the financial challenges in the housing market. Obstacles like gathering a down payment, dealing with fluctuating mortgage rates, and skyrocketing home prices pose significant hurdles.
Redfin reports that by mid-February, the national median home sale price hit $375,475, a 3.7% increase from a year before. Freddie Mac notes that by February 13, the average 30-year fixed-rate mortgage had edged down to 6.87%, the lowest this year and a decline from its January peak of 7.04%.
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Until you’re ready to buy, it’s crucial to focus on having a strong income, a solid credit score, and a low debt-to-income ratio, advises Divounguy.
Reducing debt can improve your debt-to-income ratio, which is a measure of your debt payments relative to your income. This ratio helps landlords assess your ability to cover rent costs with your current earnings.
This criterion is especially important for those eyeing single-family rentals, Divounguy points out. Moreover, if homeownership is in your future plans, keeping this ratio in healthy territory boosts your chances of mortgage approval.
Overall, staying diligent with bill payments and routinely checking your credit reports from major agencies to fix errors can position you well. A robust credit history not only strengthens your appeal as a renter but also paves the way for potential home buying endeavors, experts suggest.
