The Divergence in Single-Family and Multifamily Rent Growth: A Northwest Arkansas Perspective

May 15, 2024

Recently, media coverage has focused extensively on the cooling rental market. While these reports correctly note the softening of multifamily rent growth, with boomtowns like Austin and San Antonio experiencing outright rent declines, a critical aspect often overlooked is the continued rise in rents in many markets, particularly in the single-family sector. The divergence between single-family and multifamily rent growth in Northwest Arkansas is especially pronounced, reflecting broader national trends with unique local implications.

                                                      Northwest Arkansas

Early Growth (2019)                                                                                                                                                                                              In 2019, the single-family rental market in Northwest Arkansas was emerging. Bentonville, Fayetteville, and Rogers had comparable rental prices, averaging $1,300 per month for three-bedroom, two-bathroom homes. The cost per square foot ranged from $0.79 to $0.87, and rental properties typically stayed on the market for 31 days.

Rising Demand and Prices (2021)                                                                                                                                                                      By 2021, rental prices and demand for single-family homes in Northwest Arkansas had increased significantly. Homes were on the market for an average of only 18 days, a 42% reduction from 2019. Bentonville’s price per square foot rose to $0.91, with the median monthly rent at $1,500—a 13.3% increase. Fayetteville and Rogers saw rents rise to $1,495 and $1,550, respectively, while Springdale experienced a more modest increase to $1,350 per month.

Continued Growth (2023)                                                                                                                                                                                      In 2023, the single-family rental market in Northwest Arkansas continued to thrive. Median rental prices per square foot increased to $1.06 in Bentonville, $1.15 in Fayetteville, and $1.03 in both Rogers and Springdale. The number of single-family homes available for long-term leasing stood at 202, with the median time on the market rising to 27 days, indicating a shift from the previous year.

Despite these increases, Northwest Arkansas remains more affordable compared to the national median rent of $2,330 per month for single-family homes. However, affordability is being challenged by large capital investor funds purchasing entire subdivisions, reducing inventory and driving up both purchase prices and rental rates.

In terms of specific regional data, on May 15th in 2023 and 2024, Benton County had an average list price of $1,857.42 for single-family rental homes. In comparison, Washington County had an average list price of $1,784.40 on May 15th for the same year. Additionally, Benton County saw a slight year-over-year increase of 2%, bringing the average list price to $1,894.57 in 2024, while Washington County experienced a more significant rise of 3.5%, with the average list price reaching $1,846.25.

This trend indicates a growing demand for rental properties in both counties, although Washington County’s higher percentage increase suggests a potentially tighter rental market or greater influx of renters. Factors contributing to these changes might include local economic conditions, population growth, and shifts in housing supply. The relatively close prices between the two counties suggest a competitive rental market overall, with renters potentially considering both regions based on slight differences in cost and amenities. 

                                             National Trends in Rent Growth

According to the Zillow Observed Rent Index (ZORI), national single-family rents rose by 5.0% between March 2023 and March 2024, while multifamily rents saw a more modest increase of 2.7%. Although both figures indicate a slowdown from the pandemic housing boom peaks—when single-family rent growth reached 13.4% in March 2022 and multifamily rent growth hit 16.3% in February 2022—the sustained increase in single-family rents is notable.

A significant factor in the softness of the multifamily market is the surge in new apartment completions, driven by projects financed during the period of ultralow interest rates. In 2023, the U.S. saw over 439,000 new apartment units come online, the highest number since 1987. RealPage forecasts an even larger influx in 2024, with 671,953 apartment units expected to be completed, the highest level since 1974.

                                                         The Road Ahead

Despite the general slowdown in rental increases across the country, Northwest Arkansas continues to demand rentals, driven primarily by ongoing corporate relocations, job creation & higher mortgage interest rates. This persistent demand, combined with the limited availability of housing caused by substantial investments from large capital funds, is expected to continue pushing rental prices upward. However, the pace of these increases is likely more moderate than the rapid growth observed in previous years.

Sources:

Northwest Arkansas MLS Data

USA Today

Washington Post