Two recent headlines summarize some of today’s housing issues: 1. Big company owners of single-family homes are raising rents at the fastest rate since the last decade’s foreclosure crisis, and 2. First-time home sales currently account for the lowest market share since 1987.
Corporate landlords that own single family homes are raising rents at the fastest rate since they emerged from last decade’s foreclosure crisis. Occupancy of the hundreds of thousands of houses collected by these companies are at record highs and tenants have been accepting rent increases instead of moving out. While a Covid-19 vaccine may slow, or even reverse the move to the suburbs, favorable demographics suggest that demand for rental lodging may outlast the pandemic.
Mom-and-pop rental housing operators and individual investors that own most of the nation’s 16 million rental houses are also raising rents, albeit it a slower rate than the more sophisticated corporate landlords.
Historically, buying a home often provided a potential offset to unending rent increases. Currently, that may not be working.
Economists had expected 2020 to be a good year for first-time home buyers. However, a hot housing market, driven by low interest rates, pent up demand and supply issues, has resulted in first-time buyers being driven/priced out of the market. According to a recent survey by the National Association of Realtors, first-time homebuyers currently comprise the lowest share since 1987. Those who have been able to work at home over the last several months are now generally better able to buy a home, however, on average, Americans of typical first-time home buying age (millennials), have been hardest hit during the pandemic, with 65% reporting reduced circumstances.
It would seem that this may constitute a mixed message for home builders.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA