Build-to-rent, single-family rental markets shift gears in unique housing market
Gene Garcia, a real estate senior analyst and principal at RSM, said single-family rentals became particularly attractive to millennials during the pandemic, and as work-from-home and other trends have held steady, demand for those units has remained “sticky.”
For many would-be homebuyers, a single-family rental home is one of the only viable options for households seeking more space. With interest rates hovering above 8% and home-price appreciation having hit record levels in recent years, the combination has locked out a lot of people from being able to afford a home.
Developers within the build-to-rent space — which includes for-sale homebuilders and traditional apartment developers, among other groups — are disproportionately building them in the South, where BTR development is outpacing the next closest geography, the West, by more than 2 to 1, according to RealPage Inc.
Across the country, some 6,600 build-to-rent units delivered in the first half of 2023, 50,000 of those units are underway currently, and another 36,000 are in the planning stage, according to Yardi Matrix.
“The data suggests there is real need for this due to the housing crisis and the gap between ownership and rentership right now,” Garcia said.
But as the housing market remains in a unique situation — and more builders are having to offer concessions to lower mortgage rates and get home sales across the finish line — there’s potential opportunity for investors to purchase excess inventory from a for-sale builder, Garcia said.
Garcia said the top 10 BTR markets change on almost a daily basis, but markets like Baltimore, Pittsburgh and Philadelphia are becoming more popular. Those places didn’t see the breakneck rental growth like the Sun Belt and other markets did during the pandemic, Garcia said, and therefore are still seeing modest gains today.
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