Developers Move into Single-Family Rental Homes Sector

build-to-rent

After the global financial crash, it seemed like the housing market would take years to work through its inventory of unwanted single-family houses—and it did. Investors bought hundreds of thousands of houses at low prices, often out of foreclosure, and put these homes out to rent. Now, however, there are far fewer homes available for sale, and many developers are turning to new construction to create new rental housing.

Overall, home builders are not building many new, single-family homes. In June, home builders started construction on new, one-unit residences at a rate of 687,000 a year. Just to compare, from the mid-1990s until the housing crash, home builders never started construction fewer than a million new single-family homes a year, according to data from the U.S. Census.

The number of single-family homes intentionally built to be rental housing is still a tiny fraction of the home building overall, but it is growing quickly from effectively zero to become a new sector of the market for new development. Last year, approximately 25,000 detached homes were built for rent. Experts believe that number will increase significantly over the next several years.

Currently, one-in-10 households live in single-family rental housing – that’s 12.7 million of the total 120 million households now living in the U.S,. To serve these renters, leading master-planned community builders are likely to develop new, detached homes for rent, experts forecast.

“ Strong housing demand combined with continued tight supply should boost house prices by over 4 percent this year,” according to the economists at Freddie Mac. Eventually, home builders will start to increase the supply of single-family homes overall. But for now supply is expected to remain on the tight side.

“Home sales are on track for the best year since 2007,” say the economists at Freddie Mac. “We expect the economy to post a stronger second half, especially in the housing sector.”

That will continue to support home price appreciation for investors in single-family homes. At the same time, a strengthening economy will support demand for single-family rental housing.  Landlords will have the ability to keep pushing rental rates over the next four years while realizing steady appreciation on their underlying asset.

To learn more about build to rent homes and investment opportunities in your area, contact the 9 Core Realty team today.

 

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