• Rentals to Account for Growing Share of Single-Family Housing Starts

    Institutional Investors Attracted to Rent Growth of Build-To-Rent Sector

    In keeping with trends from past recessions, the share of single-family rental starts will increase in 2023 as mortgage rates reach multi-decade highs.

    During most recessions since 1980, the share of single-family starts built to rent has increased relative to other types of single-family residences.

    Developers delivering into a weak home-buying market will seek alternatives for their product, as purchase demand evaporates.

    Moreover, single-family rentals have grown in popularity over the last economic cycle, rising from 2.6% of all single-family starts in the last quarter of 2009 to 6.3% these days.

    Single-family rental growth has been driven by heightened interest from institutional investors, particularly in the past few years as their performance excelled.

    Between sky-high home prices and a sudden shock to mortgage rates, households face the most difficult home-buying dynamics in decades.

    An expected drop in pricing in response to high mortgage rates only worsens the outlook for developers who are currently mid-project.

    Prospective buyers are now seeking alternatives, creating single-family rental demand that for-sale home builders will be forced to chase.

    Source: www.CoStar.com