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Home builders are cashing in on rental demand

Building firms are constructing more single-family homes specifically for the Rental market, and that means a growing proportion of new homes will never be listed for sale.

Experts say the rising number of build-to-rent homes could lead to greater competition for buyers who’re already struggling with low inventories, particularly in the entry-level price bracket.

The Wall Street Journal says that tens of thousands of build-to-rent homes are being funded by investors, who believe that rental demand will remain high in suburban locations as home prices keep on growing.

Since the start of the Covid-19 pandemic, landlords in many suburban areas have reported record occupancy rates, and rents are also on an upward trajectory, the Journal said. That has prompted an increase in build-to-rent projects across the U.S. Builders that specialize in build-to-rent homes, such as American Homes 4 Rent, which has already built more than 2,500 such properties and is currently building many more, have been drawn to the market.

Landlords say that renters are also willing to pay a premium to rent a brand new home, which creates even more incentive.

“Every institutional investor is considering this space,” Trevor Koskovich, who leads investment sales at NorthMarq, a property deal adviser, told The Wall Street Journal. NorthMarq is currently involved in several build-to-rent projects in the Phoenix area, including one with 943 one- and two-bedroom single-family houses.

Some traditional home builders are also partnering with investors to build rental homes. For example, Taylor Morrison Home Corp. has said that it believes around 5% of its new homes will be sold directly to investors for the rental market. Traditionally, the company has only sold around 1% of its new homes to investors, so the trend is clearly gathering pace. Another builder, LGI Homes Inc., told the Journal that build-to-rent homes accounted for around 10% of its sales in 2020, which is around 900 new homes.

Data from John Burns Real Estate Consulting shows that in the 12 month period ending Sept. 30, 2020, more than 50,000 new homes in the U.S. were built specifically for the rental market.

The post Home builders are cashing in on rental demand appeared first on RealtyBizNews: Real Estate News.



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Home builders are cashing in on rental demand

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