Sep 22

Economists Bullish on Single-Family Rentals

Economists Bullish on Single-Family Rentals

Economists Bullish on Single-Family Rentals. Image courtesy of vectorolie / FreeDigitalPhotos.net

Economists Bullish on Single-Family Rentals. Image courtesy of vectorolie / FreeDigitalPhotos.net

 

The single-family rental market will continue to stay strong for years to come, according to Frank Nothaft, chief economist for CoreLogic and former chief economist at Freddie Mac.

Nothaft is bullish on the sector because the largest demographic cohort are 22- to 25-year-old millennials who are getting ready to form new households. The average age of first-time home buyers, on the other hand, has moved up into the 30s.

“Since the great recession began, household formation has been anemic,” Nothaft notes in a column for HousingWire. “But this year household formation will be at its highest point in 10 years — close to 1.7 million new households — many of which will be renters.”

More than 5.8 million home owners lost their homes to foreclosure during the housing crisis over the last seven years. Many have become renters, which has boosted growth of the single-family detached rental stock. For example, Nothaft singles out markets like Phoenix and Las Vegas, which faced a significant plunge in home values during the housing crisis, that have had an increase in its single-family rental stock by up to 80 percent.

About 35 percent of all rental stock are single-family rentals and single-family rentals tended to have the lowest vacancy rate – less than 3 percent compared to 8 percent or more among larger apartment buildings, Nothaft notes.

Demand is pushing up rents too. San Francisco alone has seen rents surge an average of 18 percent this year, while Phoenix has seen rents grow by nearly 10 percent year-over-year.

“No matter how you crunch the numbers, the outlook for rentals looks strong for the foreseeable future,” Nothaft notes.

Source: “Frank Nothaft: Is the Single-Family Rental Market Really a Strong Investment?” HousingWire (Sept. 18, 2015)

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