PodcastBuild-to-Rent

Housing Risks and How to Combat Them

Dean Wehrli
Shelly Chen

Dean Wehrli

Shelly Chen

February 17, 2021

Today’s headlines are filled with stories of record home price appreciation and surging housing demand. But housing, of course, is notorious for its cycles. Though we are riding a tremendous wave, there are always risks ahead we should consider. One the sharpest minds in the industry is constantly assessing these risks, in between notes on her favorite gas station Chardonnay. On the latest New Home Insights podcast episode, we talk with Melissa Abel of Texas Capital Bank. Here is a quick look at some of the things that keep her up at night—and how we might solve them.

Featured guest

Melissa Abel, Executive Vice President, Texas Capital Bank

Where the Risk Is

  • Are we stealing from tomorrow’s demand by feeding into today’s great market conditions?
 
  • The build-to-rent space (BTR) is booming, but finding the right operators who are specialized, integrated, and well built to withstand possible oversupply is tough. See below for more details on what BTR is and who the renters are.
 
  • The size of the build-to-rent pipeline is unclear, risking accidental oversupply.
 
  • The future is unpredictable. Home prices are increasing at alarming rates, but relying solely on the accelerated demand we are experiencing is extremely risky.

How to Reduce the Risk

  • Although eating into future demand is a risk, today’s very limited supply helps to combat this risk.
 
  • Focus on doing business with people you trust. You want to trust the judgement and capabilities of your clients and operators.
 
  • Ensure proper, competent management at projects you invest in.
 
  • Diversify the geographies you are in.
 
  • Maintain an adequate level of liquidity.

The Future: Build-to-Rent (BTR)

  • The BTR space has matured and prospered in recent years, and Melissa is optimistic about the future of BTR (with the right operator).
 
  • What is BTR? Detached home and townhome neighborhoods built specifically to be rented out, as opposed to sold.
 
  • BTR communities are popular among renters who prefer to rent but want the benefits of extra bedrooms, yard space, a garage, and increased privacy typical of BTRs relative to apartments.
 
  • BTR communities are an appealing choice over the more common single-family rental product given their new construction, professional management, and amenities.

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About The Author

Dean Wehrli
Dean Wehrli
Principal
Dean helps housing sector clients figure out not just what might work and what might not, but why.
Shelly Chen
Shelly Chen
Research Analyst II, For-Sale
Shelly is responsible for working on various research projects as it relates to residential for-sale, including supporting our Burns Home Builder Analysis and Forecast report.

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A comprehensive overview of the single-family rental industry’s major markets including forecasts, SFR market rankings, macro drivers, housing supply, demographic trends, and a look at Build-to-Rent.
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