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Single-Family Rental Construction Up 39% YoY

Developers ramp up construction of rental homes in response to soaring housing prices.

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Good morning. US developers ramp up single-family rental construction propelled by housing squeeze. NYCB will sell $5B in loans to JPMorgan to free up cash. Meanwhile, Miami-Dade County is grappling with an affordable housing crisis.

Today’s issue is brought to you by Redwood Living. Explore real estate investments in the Midwest BTR market.

Market Snapshot

S&P 500
GSPC
5,308.15
Pct Chg:
+1.17%
FTSE NAREIT
FNER
729.07
Pct Chg:
+1.35%
10Y Treasury
TNX
4.334%
Pct Chg:
-0.022
SOFR
1-month
5.32%
Pct Chg:
0.0%
*Data as of 5/15/2024 market close.

SINGLE-FAMILY SURGE

Sky-High Housing Costs Drive Higher Rental Home Construction Up 39% YoY

Demand for single-family rental homes is growing as soaring prices and high mortgage rates force many aspiring homeowners to continue renting.

Homebuilder bliss: In 2023, developers completed 93,000 new single-family rental homes, a 39% increase from 2022, marking a record year for rental home construction, according to a WSJ report. This trend is expected to persist into 2024, with an additional 99,000 rental homes currently under construction, though it may slow by 2025 due to tighter lending conditions.

Source: John Burns Research and Consulting

Zoom in: New rental homes range from one-bedroom cottages to five-bedroom houses, primarily located in the fast-growing suburbs of Arizona, Texas, and Florida. Despite a post-pandemic slowdown in rent growth, demand for single-family rentals remains strong, with higher occupancy rates than multifamily buildings, according to JBRC.

Follow the money: High home prices and mortgage rates above 7% are driving even affluent Americans to rent. Despite lending challenges, builders are capitalizing on this trend by targeting areas with significant housing shortages.

  • STG Capital Partners’ 200-unit rental community in Paso Robles, CA—with 2BR and 3BR rents ranging from $3K–$3.7K—targets renters who prefer leasing. Notably, the median home price in Paso Robles is $700K.

  • Chicago-based Heitman announced a $235M JV with homebuilder Crescent Communities to construct BTR homes in the Sunbelt.

  • Invitation Homes (INVH) is planning to buy 500 under-construction homes in Charlotte, Nashville, and Jacksonville.

Every good story needs a boogeyman: Single-family rental companies face scrutiny from Congress, with concerns that Wall Street's involvement in the housing market may reduce overall housing affordability. However, builders of single-family rentals argue they are addressing the housing shortage by creating new homes rather than converting existing ones.

➥ THE TAKEAWAY

Big picture: During the pandemic, rents for houses and apartments increased by over 20%. By 2022, the median renter spent 31% of their income on housing, a level the federal government considers cost-burdened. Meanwhile, mortgage costs have skyrocketed, with average monthly payments 38% higher than apartment rents as of March 2023. As homeownership becomes increasingly unaffordable, more families are turning to renting, driving a surge in SFR’s.

TOGETHER WITH REDWOOD LIVING

Gain Direct Access to Redwood’s Midwest Investment Opportunities

Multifamily build-to-rent investing offers real estate investors a smart tactic for diversifying their portfolio—especially when the investment is with a company with a strong track record.

With 30+ years of experience building and managing apartment rentals in the BTR sector, Redwood Living, Inc. has several upcoming equity investments in the Midwest market that are worth considering.

Located in highly desirable areas where Redwood already has a presence, these deals will be available soon—but only to those with access to Redwood's investor portal.

Disclaimer: No information in this email should be used as or considered an offer to sell or a solicitation of any offer or invitation to buy any securities or interest in any issuer company. Past performance is no guarantee of future results and should not be relied upon as an indicator of the Partnership’s future performance or success.


✍️ Editor’s Picks

  • Getting creative: CRE lending slowed in Q1, but revealed an uptick in specific types of lending, including transactions over $100M, as alternative lenders fill the vacuum left by big banks.

  • Banking boost: New York Community Bancorp plans to sell $5B in loans to JPMorgan (JPM) to boost capital and improve liquidity. NYCB stock was up 3.4% in extended trading.

  • American Dream deferred: Despite this year’s slowdown in sales and home price appreciation, in 4Q23, US homes were still overvalued by 11.1% on average in 90% of major metro areas.

  • Downsizing design: Page, a design firm with 21 locations, strategically reduced its workforce after acquiring three firms, aiming to enhance client services.

  • Silicon Rail: The Federal Transit Administration will provide $3.4B to extend the Caltrain line by 1.8 miles, including a 1.3-mile tunnel in downtown San Francisco.

🏘️ MULTIFAMILY

  • JV of the day: RBC Capital will acquire 1.2K apartment units from Ballast Investments and Goldman Sachs (GS) after defaulting on $687.5M in loans.

  • Developers diversify: Three partners sold a 1.6-acre piece of a Long Beach mall property to Texas-based JPI, which plans to build apartments.

  • Financing affordability: Miami-Dade County faces an affordable housing crisis, lacking 90.2K units below 80% AMI, with 14K units needing $1.5B in funding.

  • Seattle success: Bridge Investment Group refinanced Bloom Apartments a 135-unit multifamily community in Kirkland, WA, with a $39M interest-only loan.

🏭 Industrial

  • Luxury logistics: High Street Logistics acquired a 440KSF, four-building complex in Denton, TX, from Urban Logistics for over $60M.

  • Dragging down the mean: Lower warehouse rents in CA’s Inland Empire drove Sun Life Financial's (SLF) US real estate portfolio value down 15% to $1.3B.

  • Leadership transition: Amazon Web Services (AMZN) CEO Adam Selipsky is stepping down, with Matt Garman taking over as the cloud services provider reported $9.42B in Q1 income.

🏬 RETAIL

  • Rise and shine: Kimco Realty (KIM) purchased RPT Realty (RPT) for $2B, adding 56 shopping centers with 13.3MSF to its portfolio as the REIT, anticipates a continuing retail recovery.

  • Moving around: Walmart (WMT) confirms the layoffs of hundreds of corporate employees, as many are forced to relocate to the mega-retailer’s Arkansas HQ.

  • Shopping spree: MCB Real Estate and Generation Properties is building The Shops at Fairway Village in Waldorf, MD, a $115M mixed-use project with 186 residences set for Spring 2026 completion.

🏢 OFFICE

  • Office oasis: Nome Capital Partners' investor group bought a 595.6KSF office complex in Pleasanton near San Francisco for $151.8M, priced at $255PSF.

  • Sector struggles: US office sector distress gets worse with a 6.4% CMBS loan delinquency rate in April, the highest since 2018, and $1.57B in delinquent loans.

🏨 HOSPITALITY

  • Vacation forecast: Hospitality executives project strong business and group travel demand in months to come, but see flat or slightly lower leisure demand on the horizon.

A MESSAGE FROM BV CAPITAL

Surging Population in Texas means Opportunity for Investors

Texas’ population grew more than any other state in the country between 2022-2023 according to recent estimates from the U.S. Census Bureau. Of the 1.6 million people the nation gained between July 2022 and July 2023, nearly 30% are Texas residents.

With fewer units coming online and the migration to Texas showing no signs of slowing, this will create a future supply and demand imbalance that, to investors, can mean only one thing - opportunity.

Disclaimer: No information in this email should be used as or considered an offer to sell or a solicitation of any offer or invitation to buy any securities or interest in any issuer company. Past performance is no guarantee of future results and should not be relied upon as an indicator of the Partnership’s future performance or success.

📈 CHART OF THE DAY


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