Jake and Stephanie Murphy are moving into a new single-family rental home built by American Homes 4 Rent.
Diana Olick | CNBC Real Estate Reporter
As demand for single-family rental housing rises, large landlords are jumping into the home-building business to help drop supplies.
The push is coming because more Americans have the flexibility to work from anywhere and are looking for larger spaces with outdoor areas.
“There is very little supply in this market. There is not enough quality housing for the number of American families,” said David Singelyn, CEO of American Homes 4 Rent, which has built more than 100 rental-only communities over the past five years.
According to the National Association of Housing Builders, 13,000 new single-family homes were rented in the first quarter of this year, 63% more than a year ago. Rented housing is still only 5% of the housing market, but this is above the historical average of 2.7%, according to the association.
In Mooresville, North Carolina – 30 miles north of Charlotte – the latest developments in American Homes 4 Rent include more than 220 rental homes with access to amenities including a pool and fitness center. Landscaping and maintenance are included in the rental.
Jake and Stephanie Murphy, who have been able to work remotely since the pandemic, are among those who relocated to the community after selling their California home. They were able to buy it, but decided to rent a four-bedroom apartment for their family for $ 2,400 a month.
“We’re not sure if home prices will stay where they are today. So we didn’t want to buy into the peak and then go down in a couple of years,” said 29-year-old Stephanie Murphy. .
Murphys also said they liked the flexibility of the rental as they learned about a new area.
The number of rents is now falling slightly as some smaller landlords sell their homes at the top of this expensive market. But Singelyn hopes to continue building rental housing in the coming years, which she says she is looking forward to as demand strengthens.
“How many inquiries are we receiving? How many shows? How many applications are we receiving in every home available? It’s two or three times bigger than the pandemic today than it is two years ago,” Singelyn said.
Other companies investing in the construction rental market are Lennar, DR Horton, Taylor Morrison and Toll Brothers. Invitation Homes, the largest publicly traded landlord, joined a joint venture with housing builder Pulte Homes last year to build more rental housing.
Investment in single-family rentals, both the purchase of old homes and the construction of new ones, has grown exponentially. The sector had investments of about $ 3 trillion in 2020, according to John Burns Real Estate Consulting. In 2021, the figure rose to $ 30 billion. It is expected to reach $ 50 billion this year as larger institutional investors, homeowners and landlords enter the market.
Like most large landlords, American Homes 4 Rent entered the business when millions of homes were foreclosed on during the Great Recession. The company acquired cheap and distressed properties, often at auction, and turned them into profitable rents.
In 2006, there were 11.6 million single-family rental homes at the height of the last housing stock. That figure rose to $ 15.5 million after the housing market crashed in 2014, according to John Burns Real Estate Consulting.
But growing demand and tightening supply also mean that rental housing is cheaper. Nationwide, single-family rents have risen more than 13% from a year ago, according to CoreLogic.
“Poor rental single-family property has hit the market, and rents have risen at record rates,” said Molly Boesel, CoreLogic’s chief economist. He noted that the number of single-family rental properties listed earlier this year was well below pre-pandemic levels.
In Mooresville, North Carolina, the Murphyts are watching the market play out. But Jake Murphy said he doesn’t think home ownership is part of the American Dream, and he’s enjoying renting it right now.
“I’m glad you look at the neighborhood because it’s like Texas license plates and New York, and then we have California,” he said.