SFR Market Overview
IMN 11th Annual Single Family Rental Forum (East)
SVN | SFRhub Advisors is proud to make our 12th consecutive return as the Exclusive Lead Sponsor at IMN’s 11th Annual Single Family Rental Forum (East). Not unlike the previous three years, the shifts that have occurred during the 6-month stretch between the IMN SFR East and West conferences are astounding.
Download the slides below to view the supporting data and graphs from John Burns Research & Consulting, Hunter Housing Economics and Altisource.
This is the very first IMN SFR conference taking place in a negative leverage climate. SFR commercial permanent financing has doubled as well as home mortgage interest rates. This shift has been a double-edge sword as the cost of doing business has increased for the industry, but then positively, so has the demand. A rental home shortage of approximately 1.7MM rental homes per year is projected, creating a rental home shortage of 12MM+ through early 2030’s.
We are seeing mortgage rates continue pricing home buyers out of the market. The YOY variance is about 17% between the cost increase for an average down payment, which is up 22%, when during the same period the average rental increase has on average reduced to about 5%.
YOY home price appreciation has reduced from +20% annually to an average of -1% while annual SFR rental rate increased from an 8% growth down to 5% and apartment rents from 14% increased down to 5%.
In the past 1.5 years, we’ve seen that cost of owning a home variance to renting range from $900 to $1,400 per month more, which now it is approximately $1,000 per month less expensive than to rent vs. own the same house with same floorplan on the same street by the same builder.
As mortgage rates increase from 3% to the current 6% range, over 17MM people have been priced out of purchasing a home. This has added increased tenant demand for both scattered asset SFR as well as new construction BFR neighborhoods.
A recent rent study by Hunter Housing Economics in April 2023 indicates that nationwide apartment renters with household incomes between $75,000 and $99,999 would pay $600 or more per month above what they are paying for their apartment to live in a new detached single-family home, and those making between $100,000 and $124,999 per year would pay $685 more per month.
As expected, the BFR industry has experienced a perfect storm with increased demand due to unaffordable high mortgage rates, along with many other factors.
Hunter Housing Economics indicates that the BFR industry is expected to experience a 2023 rental increase after the Q3/Q4 softening in 2022, and forecasts that 132k BFR homes will come online this year, growing to 153k next year with continued growth beyond.
Top SFR markets (based on housing trends, affordability, economic trends, employment and Demographics) include Huntsville, many Tier II markets such as Jacksonville, and mostly all Florida markets.
Thank you to John Burns Research and Consulting, Hunter Housing Economics and Altisource for the data included in this presentation.