The Rise of Build-To-Rent Investing

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One of the most dramatic shifts in the U.S. market over the past decade has been the unprecedented increase in single-family home rentals (“SFRs”). While there has been widespread discussion of the economic and demographic shifts affecting the U.S. multifamily rental market, a major component of the overall rental market—single-family rentals—has been largely overlooked. Understanding the recent dramatic shifts in the single-family rental market is critical to having a complete picture of the overall U.S. housing market.

As we set out to better understand the key drivers of the single-family rental market, we asked the following questions: What are the characteristics of the rental market for single-family homes? What market conditions and actors have driven changes in single-family rentals over time? What are the economic and demographic characteristics of households living in single-family rentals?

Our research found that:

  • Between 2005 and 2014, single-family rentals accounted for 88.9% of the net increase in occupied single-family stock and 62.5% of the increase in total occupied housing units.
  • While institutional-investor-owned inventory comprises a tiny share of overall single-family rental stock, the ongoing institutionalization of the sector—as well as its staying power—are key indicators of the market opportunity.
  • Single-family renter households predominantly consist of lower- and middle-income families with children, whereas single-family homeowners are much more likely to be older, wealthier, and not have children at home.

The 15.1 million rented single-family homes in the U.S. account for 13% of all occupied housing stock in the U.S. and make up over one-third of all occupied rental housing stock. In the U.S., there are roughly 117 million occupied housing units. Of these, 80 million are single-family (attached and detached), 30 million are in multifamily buildings with two or more units, and just under 7 million fall into other categories. Within this inventory mix, there are approximately 73 million owner-occupied housing units and 43 million renter-occupied units. Single-family detached homes made up the largest individual share of the rental housing stock, comprising 29% of the entire rental market in 2014. Combining that portion of the market with the share of townhomes (single-family attached), all single-family residences accounted for 35% of the occupied rental stock in 2014.

The SFR market has come across the problem of dwindling inventory, calling for the need for build-to-rent homes.  If you are an investor looking to diversify your portfolio with build-to-rent contact the 9 Core Realty team!

 

Home Builders Forecast Best Housing Market in 11 Years

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There is great news forecasted for not only the housing market, but the build-to-rent market as well.  Home builders feel terrific about the future of U.S. housing. With today’s mortgage rates ultra-low and U.S. rents rising, home builders are planning for another strong finish to the year for housing, and a fantastic start to 2017.

Market confidence among the nation’s builders is at decade-best levels. As measured by the National Association of Home Builders’ Housing Market Index (HMI), home builder sentiment reads 63 out of 100, which is a “confident” figure.

Home builders plan to sell more than 650,000 new homes this year, and buyers could usher in even higher demand next year. It could be a good ideal for home shoppers to buy this fall and winter, before the spring rush.

Once monthly, the National Association of Home Builders (NAHB) surveys its members on current housing market conditions; and their outlook for the housing market’s future. The results are compiled into the Housing Market Index. Informally, the report is called the “home builder sentiment survey” and it reflects home builder attitudes about the nation’s single-family, new construction housing market.

The index is one of the most anticipated reports published each month, because it provides clues to housing market health six-to-twelve months in advance. Home builders gather real-time, “on the ground” data as they observe buyer foot traffic and actual sales in their day-to-day business. They recognize real estate trends long before economists do. For instance, a home builder sees rising interest in its homes. Potential buyers visit model homes and sign contracts to buy. In response, the builder obtains new building permits and breaks ground on developments. Conversely, it will hold off on projects if foot traffic wanes.

Without the Housing Market Index, economists may only have access to data for planned or started homes. But that data is a lagging indicator of what happened in the market months prior. This forward-looking report is important to economists, but can be valuable to investors in the build-to-rent sector and the everyday home buyer, too

Many buyers today feel they have “missed out” on future home appreciation, now that house values have risen steadily since 2012. They feel demand for homes will drop and, in turn, prices will cool off.

Home builders would beg to differ. Today, builder sentiment reads a healthy 63, just two points down from September’s 2016-best rating of 65. The report signals continued strength in the housing market. In the NAHB Housing Market Index, 50 is the inflection point in the index between “good” conditions and “poor” ones; and November’s reading marks the twenty-ninth straight month in which the HMI has logged north of 50.

Buoyed by low mortgage rates and big demand from buyers, home builders believe today’s housing market is solidly in positive territory. Home buyers who have been on the sidelines should consider buying before the rush of spring 2017. November’s HMI indicates the market will be strong next year and perhaps beyond.  To learn more about the build-to-rent market how to invest in it, contact a member of the 9 Core Realty team.

Lifestyle Trends Fuel Build to Rent Market in SWFL

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There is a growing trend toward renting rather than buying, a choice being made by young professionals as well as retirees. According to the US Census Bureau, homeownership is at its lowest rate in 50 years, a reflection of the trend toward renting.

There are many advantages to renting. For young professionals, renting provides the flexibility to make career changes without worrying about selling a home. It relieves them of worry about mortgage debt. For retirees, renting means that they no longer have the care of maintaining a home. And they can enjoy amenities such as a pool and fitness center, without condo fees or HOA dues.

A renter will generally pay less in insurance and taxes and has no risk of loss of value in periods of recession.

Author Kelly Phillips Erb points out in Forbes magazine “Eleven Reason Why I Never Want to Own A House Again,” most of which relate to tax issues. She notes that a house is not always a good investment, and out of pocket expenses exceed savings. Actual interest paid on a mortgage may easily exceed the value of a deduction on federal income taxes. And in the event of a loss when selling, the loss is not deductible on an individual’s tax return.

Renting doesn’t mean sacrificing a lifestyle. Instead it means having more time to participate in the activities an individual enjoys.

To learn more about the build to rent market in SWFL, contact an expert member of the 9 Core Realty Team.

 

Progress on Construction at Babcock Ranch

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As Homes by Towne, Stock Development, Fox Premier Builders and Florida Lifestyle Homes continue to build new furnished model residences in the community’s Lake Timber neighborhood, master developer Kitson & Partners announced that infrastructure installation and construction of Phase I of the Downtown District continue to progress as scheduled at Babcock Ranch, a new 18,000-acre eco-centric, solar powered town being developed by Kitson east of Fort Myers, State Road 31 in Charlotte County.

Lake Timber is the first residential neighborhood to be built at Babcock Ranch. Completed furnished models are expected to be open for viewing in early 2017. Each home at Babcock Ranch is being built to Florida Green Building Coalition Certification standards. Purchase agreements will be accepted beginning in November.

Improvements to the State Road 31 turn lane at the primary entry to Babcock Ranch have been completed and paving of Babcock Drive, the town’s main thoroughfare, has been completed from State Road 31 to Founder’s Square at the heart of the Downtown District. Landscaping of the streetscape continues to progress. A dozen oaks 30 to 40 feet tall harvested on the property, over 100 palmetto bushes, and more than 500 additional trees have been planted along the roadway. Irrigation systems have been installed and construction of the town’s signature bridge that will showcase views of Lake Babcock and Lake Timber is nearing completion.

Construction of the Sunset Park Trailhead that will provide access to the town’s 50-mile network of nature trails is underway. Cable and fiber that will provide ultra-high speed internet access to every home at Babcock Ranch is in the process of being pulled within Lake Timber. Florida Power & Light’s transformers have been installed in Lake Timber and will be operational in November. Construction of a boardwalk along the banks of Lake Babcock at Founder’s Square is underway. The Town & Country Utility Site’s raw water pumps along Hercules Grade are now operational and will supply potable water to the community. Power has been run to the water treatment building and the treatment plant is on schedule for completion by the end of the year.

The Lake Timber neighborhood is a short walk or bike ride from Babcock’s Downtown District and Founder’s Square, a lakefront green space that will serve as a town-wide gathering place, the site of community events, concerts, and a place to simply relax and enjoy the lake views.

To learn more about investing in Babcock Ranch homes or build to rent homes in Babcock Ranch contact the 9 Core Realty team.