The stock market has changed its tune from being bullish on for-sale housing to being bullish on rental housing. Apartment stocks are up 35% YTD, and single-family rental stocks are up 5%—while the home builders are flat.
While survey after survey (including our own) indicates that consumers overwhelmingly want to own a home at some point in their lives, there is a big difference between the ambition to own and the ability to own. Increasingly, it appears that financially strapped families desirous of single-family living are turning to rental housing.
Professionally Managed Rental Homes
People forget that it took several decades for the apartment sector to flourish from a cottage industry into a $92 billion dollar publicly traded investment class. We think the single-family REIT sector will be able to scale at a much quicker pace, due in large part to ubiquitous data and technologies that simply did not exist until just recently. Some might worry that single-family REITs will pull demand away from apartment REITs; however, the renter profile for each subsector is very different, allowing for continued growth across the entire rental universe.
We believe that the single-family REIT sector is still in its infancy, especially when you consider that publicly traded single-family REITs account for less than 1% of the 14.9 million single-family rental homes that exist in the US. Our firm has been at the forefront of this emerging institutional asset class, publishing a white paper back in 2011 titled Renting REO to Stabilize Housing, where we recommended the REO to rental model as a solution to the then ongoing downturn in housing. We are very pleased to announce the development of a new recurring research report that will focus on the single-family rental market, with the aim of helping operators, lenders, investors, and rating agencies navigate this market.
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