The rental market data for the performance of investment grade rentals during the month of May is in and it offers some fascinating insight.
First let’s start with the biggest surprise: At the end of May, the available inventory of rental properties in the quality submarkets that we track jumped to 569 (+22% over April) even as the units leased during the month of May increased 9% year over year (and 7% over last month). In my opinion this comes as a result of two factors. First, this is an indication of increased purchasing activity by real estate investors that are buying at a faster pace in an attempt to avoid interest rate increases in the horizon. Second, since we are getting into the hottest time of the year for rentals, many of the units leased last year with one year terms are coming up for renewal thus contributing to the higher inventory.
The current number of units available for lease and the average rate of properties leased over the last 12 months represent 33 days of inventory on the market. Given the feedback we are getting from the rental market on a first hand basis, I think the added inventory will lead to an even higher number of units leased during the month of June.
Finally, rents rose by 3% year over year (declined 0.8% over April’s figure) and days on market shrank to the second lowest level since 2007 (21 days). This is good news for investors who are looking for a counterbalance to rising asset prices as the housing market is in full recovery mode.