Instituciones Acuden en Masa a Alquileres Unifamiliares a Medida que la Pandemia Aumenta la Demanda.

febrero 16, 2021

Institutional investors and apartment managers see opportunities in single-family rentals as many Americans choose not to pursue home ownership in today’s competitive housing market.

The pandemic has led to a surge in demand for the kind of private living space offered by single-family homes. This trend has caught the attention of institutional investors, individuals and apartment managers, many of whom are placing big bets on single-family rentals.

In recent times, it is easy to understand the appeal of living in detached homes rather than a smaller unit in an urban apartment complex. The phenomenon is easily explained by the desire to escape the congestion and restrictions of city centres coupled with the new flexibility of remote working and more time at home.

With a housing shortage driving prices to all-time highs, there is little doubt why Americans are embracing renting instead of buying a spacious, modern suburban home.

According to realtor.com , the median listing price for a single-family home in December 2020 was $340,000, up 13.4% from the previous year. Nationally, the number of homes for sale in December was down 39.6% from the same period in December 2019, which translates to approximately 449,000 fewer homes available.

Renting a single-family home can be a viable solution for several important reasons. In many markets, purchasing a home is simply out of the financial reach of the average earner. In other cases, residents seek greater flexibility during periods of uncertainty or simply prefer to avoid the commitment and risks of house price fluctuations and/or a long-term mortgage.

Investors, developers and apartment managers have taken note of this trend. Prior to the recent surge in demand for single-family rentals, institutional landlords accounted for just 3% of total inventory, providing ample market share for newcomers.

The uncertain future of offices and shopping centers, along with the question of multi-family, has forced investors to look for new vehicles to allocate capital.

Another testament to this trend can be found in the REIT sector. Single-family rental REITs have outperformed the broader REIT market in 2020 by 23%, outperforming the traditional multi-dwelling (-9%), office (-22%) and shopping center (-33%) sectors, according to JLL Research .

Single-family rentals are seen as an opportunity to get ahead of what is believed to be a long-term trend. With inventory historically low, the next reasonable step for investors is to use the influx of capital to create their own housing supply through a build-to-rent model.

Construction of new units has been at a steady average of around 31,000 units over the past 40 years. We are now seeing an increase to 50,000 units and rising. The 2008 housing crisis started the single-family rental trend and now the COVID-19 pandemic is fueling it.

We are also seeing traditional large apartment operators, such as Greystar Real Estate Partners, adding single-family rentals to their portfolios. Greystar currently manages 1,500 homes and is targeting growth to 25,000 homes as discussed in this Bloomberg article .

With the idea that others would be willing to rent rather than borrow, apartment managers see an opportunity for a longer sales cycle.

It’s always easier to rent or sell to an existing customer, and many are likely to follow the same logical line of thinking to serve customers throughout the life cycle of the home. Gary Beasley, CEO of Roofstock, described it best, the cycle begins with renting urban apartments to residents in their twenties, moving them to rental houses in the suburbs in their thirties, and finally selling them a house in their forties.

By Kris Oxtal MAI , Partner

koxtal@capright.com