As demand for single-family rental homes skyrockets amid a growing preference for larger, more spacious homes, data released this week shows investors are flocking to the market to buy more stocks.
A CoreLogic report this week shows that rents in the United States rose on average 9.3% in August compared to the same month a year ago, compared to an increase of 2.2% that year.
For the first time since the outbreak of the coronavirus pandemic last year, every major metropolitan housing market in the United States has experienced positive rental growth. The biggest gain was seen in Miami, where rents rose 21% on average, followed by Phoenix at 19%. Las Vegas was third, with rents increasing 15%.
CoreLogic economist Molly Boesel noted how much converging economic trends are responsible for this surge in single-detached house rental prices, with rising consumer confidence driving increased demand for housing from both renters and buyers. .
“The continued preference for more living space and the low inventory to sell is forcing potential buyers back to renting and is straining the single-family rental market,” she said.
With rents rising rapidly, landlords can enjoy great prosperity, which has caused investors to rush into the market and buy more rental housing. A second report this week, from John Burns Real Estate Consulting, revealed There have been approximately 43 listings totaling over $ 30 billion in capital targeting rental housing in the United States.
John Burns principal and researcher Danielle Nguyen said it was difficult to determine the actual amount invested in rental housing this year because some of that money is just a capital investment and excludes the debt. There has also been a lot more investment in space that has not been made public, she said.
Nguyen said a number of factors have converged to drive investor demand, noting that global bond yields are at historically low levels and investors need higher yields. Inflation is also rising, she said, and investors traditionally view real estate as a hedge against this. In addition, the rapid growth in rents is supported by high occupancy rates, which means that rents are not expected to drop anytime soon.
She added that “tenants have shown that they are willing to pay a premium to rent in a new residential area managed by a professional owner.”
“Many tenants clearly benefit from a better rental experience by living with neighbor tenants (instead of owners) and have no fear that their landlord decides to sell the house very soon,” Nguyen wrote.
This latter claim is supported by data that shows strong growth in rents in more expensive housing. CoreLogic’s report found that the lowest rents, that is, those costing 75% less than the regional median, saw rent prices jump 7.1% in August from it. a year ago. But the more expensive rents, which cost 125% or more than the regional median, have increased by an average of 10.5% over the same period.
Additional data from the National Association of Realtors recently showed that while overall August home sales declined slightly, investors made up a greater proportion of buyers this month. In contrast, first-time buyers, who traditionally account for about 40% of all home sales, have seen their share drop to just 29%, the lowest level in more than a decade.
The NAR said this was due to weakening affordability as house prices rose, resulting in greater demand in the rental market.