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The vacancy rate across 23 single-borrower, single-family rental transactions reached 5.0 percent in August, the first time this metric has touched 5.0 percent since November 2015, according to the recent Single-Family Rental Performance Report from Morningstar Credit Ratings.
“This marked the fifth straight monthly increase in vacancy, but the overall level remained within our expectations,” said Morningstar.
At 7.7 percent, Sarasota-Bradenton-Venice, Florida had the highest vacancy rate among the metropolitan statistical areas (MSA) most typically seen in single-borrower, single-family rental deals. Houston had the highest vacancy percentage last month, but is now second after improving to 7.1 percent.
Other notable ranking included Indianapolis, Indiana with a vacancy rate of 6.6 percent as well as Fort Lauderdale, Florida with a rate of 6.4 and Chicago, Illinois with a rate of 6.3.
On the opposite end of the spectrum, Morningstar reported Los Angeles, California as having the lowest vacancy rate of 3.3 percent and Fort Worth-Arlington, Texas following close behind at 3.6 percent.
The relationship between lease expirations and vacancy generally remains at the MSA level and can be seen in Sarasota-Bradenton-Venice and Indianapolis. However, despite Houston and Chicago have historically had higher than average vacancy rates, both MSAs improved from last month.
"Vacancies increased slightly due to a higher number of lease expirations during the summer months," said Brian Gow, Managing Director of ABS and RMBS at Morningstar Credit Ratings. "If a lease expires and a tenant moves out, that property is shown as vacant until it is re-leased. Therefore, when the number of lease expirations increases, the natural turnover in tenants leads to a temporary increase in vacancies until the properties are filled."
Delinquency rates in single-family rental securitizations averaged 0.6 percent in August, which is even with the level from the prior month. As of July, the most recent data available, the average retention rate for full-term leases stayed flat at 72.0 percent.
