Housing market trends are fueling growth in single-family home rentals


LOS ANGELES (AP) – Home builders and other real estate companies are increasingly betting that potential buyers frustrated by the shortage of homes for sale and sky-high prices will just rent out their share of the American dream.

While individual homeowners and family investors still make up the vast majority of single-family rental homes, home builders have stepped up construction of new rental homes this year.

In the third quarter, builders opened 16,000 single-family homes intended for rental. This is the highest quarterly total of built-for-rental housing starts dating back to at least 1990, according to an analysis of U.S. Census data by the National Association of Home Builders.

The trade association’s analysis only includes homes that builders will keep and rent. This excludes homes under construction to be sold to real estate investment trusts or to investors planning to lease the properties.

While these rental units accounted for just 5.4% of all single-family housing starts in the third quarter, builders are doubling down on the rental construction model, with some already aiming to build more rental units for investors or investors. business owners eager to capitalize if potential homeowners continue to struggle to find affordable properties.

“Traditional builders find it very difficult to build entry-level homes,” said Ali Wolf, chief economist at Zonda Economics, a real estate industry tracker. “The space built for rental somewhat serves its purpose of being entry-level housing in a market where new, reasonably priced homes are scarce. “

Rising home prices and fierce competition for a relatively few affordable homes for sale are pushing the boundaries of affordability for many potential buyers. The median price of a previously occupied U.S. home jumped to $ 353,900 in October, a 13.1% increase from the previous year, according to the National Association of Realtors. The houses are sold in the days following their listing.

These trends were good news for homeowners, however. Rents for US single-family homes jumped 10.2% in September from a year earlier, according to real estate information company CoreLogic. The company excludes apartments from its single-family home rental data, although it does include condominium and townhouse rentals.

CoreLogic expects rents to continue rising at least until the end of this year, citing strong demand, weak supply of rental units and a strengthening labor market.

Recent quarterly earnings from the nation’s two largest, publicly traded single-family rental homeowners underscore the favorable outlook.

Invitation Homes and American Homes 4 Rent both posted strong third quarter results, driven by rising rents and occupancy rates near historic highs.

BTIG analyst James Sullivan reiterated his “Buy” rating for both real estate investment trusts, or REITs, noting that housing market trends including supply chain challenges and rising prices Labor and material costs, which slow the pace of construction for home builders, remain “very favorable” for single-family rentals.

New home construction in the United States was operating at a seasonally adjusted annual rate of 1.52 million units in October, according to the Commerce Department. This is an increase of 0.4% from the rate a year earlier. But single-family home starts fell 3.9% from September to October and more than 10% from last year.

The number of starts of homes built for rental remains low compared to the number of newly started homes put up for sale. In total, builders have opened up 47,000 rental homes in the past four quarters, a 17.5% year-over-year increase, according to the NAHB. During the same period, builders opened 1.14 million single-family homes.

Some of the country’s largest home builders are looking to capitalize on demand for rental housing.

Some are selling homes to investors or businesses looking to take over communities already crowded with tenants. In July, PulteGroup announced an agreement to build and sell approximately 7,500 homes over the next five years to Invitation Homes.

DR Horton has built apartment complexes as well as single family rental housing communities. This month, it estimated that its rental operations will generate more than $ 700 million in revenue from the sale of rental properties in its current fiscal year. Horton also said he plans to increase his investment in his rental business by more than $ 1 billion during the same period.

This spring, Lennar formed a company with several institutional investors that aims to spend over $ 4 billion to buy new single-family homes and townhouses from the home builder and, potentially, other builders, and then rent them out. .

“It has really evolved over time, but the star of the real estate show today is construction space for rent,” Wolf said.

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