Blog Articles, Single Family Residential

Single-Family Rental Market Predicted To Become More Cyclical

Originally posted by | Ted Knutson

The single-family rental market will be more cyclical going forward, primarily because the rise of newly built rental subdivisions will create a supply of vacant homes, John Burns Real Estate Consulting’s Danielle Nguyen predicted recently. 

She contended high supply, which has always contributed to apartment cyclicality, will contribute to single-family rental cyclicality as well.

Strong fundamentals are driving investment, and hence new supply, in this sector of the market. Single-family year-over-year rent growth reached a 16.5-year high in July 2021, according to the CoreLogic Single-Family Rent Index and in many markets exceeding double digits including Phoenix (+13%), Riverside-San Bernardino (+12%), and Atlanta (+11%).

GenZers are a large part of the demand propelling rents. A survey by Satisfacts/ApartmentRatings late last year showed this demographic wants to live in detached single-family homes once they graduate, unlike previous generations who preferred apartments.

In addition to the desire of renters for more space John Burns Consulting said the single-family rental industry is also benefiting from extremely tight for-sale housing supply at entry-level price points, which is where many single-family renters who want to buy a home typically search.

The company noted rising rents haven’t been a deal breaker for many relocating tenants since they are moving from more expensive markets where they were paying even higher rents.

Meanwhile, supply of these homes is steadily increasing as companies jump into the space.

Recently, for example, Crescent Communities and Pretium formed a joint venture to invest in single-family build-to-rent homes in the Sunbelt region. The partnership will invest $1 billion and develop more than 3,000 new rental communities in the region under a brand called Harmon.

Tony Chen, managing director of single-family build-to-rent at Crescent Communities, said the platform will help to increase the supply of highly in-demand rental housing.

Lately, as well, Aspen Heights Partners, a vertically integrated developer, builder, and operator of lifestyle-oriented residential communities, launched Bell Yard, a single-family rental community brand. 

The company said Bell Yard, is a new brand looking to capitalize on the still roaring single-family rental market.

And earlier this summer, JLL Income Property Trust announced its first foray into single family rental homes with an investment of $560 million for a 47% stake in a national portfolio of over 4,000 units.

“This is a unique and attractive opportunity for us to enter the single-family rental market at scale through a previously acquired, renovated and stabilized portfolio with broad nationwide diversification,” said the trust’s president and CEO Allan Swaringen.

Originally posted by | Ted Knutson

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