With single-family rents skyrocketing, investors are doing their best to elbow themselves into this lucrative rental market segment.
Investors Flooding Into Single-Family Rental Property Segment
Investors have left their 2020 passivity at the door and jumped into the single-family rental market segment head-first during Q2 2021. According to Molly Boesel, economist with CoreLogic, “Converging economic trends are driving a surge in single-family rent prices…the ongoing preference toward more living spaces…is forcing would-be buyers back into renting, putting significant strain on the single-family rental market.”
According to data from John Burns Real Estate Consulting (JBREC), investors are racing to buy AND build more rental properties. JBREC tracked approximately 43 announcements totaling more than $30B in capital targeting US rental housing in Q2 2021 alone.
Danielle Nguyen, senior manager, research with JBREC, said in a press release, “Since some of this is only the equity investment and excludes the debt, and we know of far more than this that is not public information, the real number is much higher.”
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Why the Investor Demand for Single-Family Rental Properties?
Nguyen cited the below reasons for such rabid investment demand in single-family rental properties:
- Worldwide bond yields at historic lows and investors need yield
- Inflation rising and most investors view rental homes as hedge against inflation
- Record rent growth underpinned by high occupancy rates
- Renters demonstrate again and again they willing to pay premium rent price for new home neighborhood under professional landlord management
Investors Increasing Their Market Share of Sales
The National Association of REALTORS® (NAR) indicated that investors gained a larger share of residential sales in August 2021 than in August of 2020 while the market share of sales by first-time homebuyers declined. First-time buyers accounted for only 29% of all residential sales in August, down from their historically 40% of all sales.
(According to CoreLogic, investors are now making up their largest share of investor purchases in the past decade. For example, investor share in total market sales during Q2 2021 came in at 24.3%.)
The reason? Home prices continue to skyrocket thus weakening affordability for first-time buyers and boosting first-time buyer demand AND need to rent.
Such increasing demand and need from first-time buyers to rent simply motivate investors to get in on this single-family rental action.
Thanks to CNBC, CoreLogic and the National Association of REALTORS®.