Homebuyers’ losses are single-family rental landlords’ gains.
Owners of single-family homes have been able to raise rents as homebuyers are sidelined by high prices and daunting mortgage rates, the Wall Street Journal reported. Single-family rents are proving more resilient than apartment rents, which are softening after pandemic surges.
As of September, the median national rent on single-family homes had increased 2.6 percent year-over-year, according to CoreLogic. For the same period, the median national apartment rent decreased 1.3 percent, according to Apartment List estimates.
Major landlords of single-family homes are hiking rents far beyond the median. Tricon Residential, Invitation Homes and American Homes 4 Rent combine for a portfolio of more than 180,000 rental properties. Each company posted rent increases higher than 6 percent year-over-year in the third quarter.
Tricon CEO Gary Berman directly tied his company’s increases to the housing market, telling investors that in “such a distorted environment for homebuyers, the case for rental is more compelling than ever.”
Beyond the dicey homebuying environment, it is simpler for single-family landlords to raise rents than it is for apartment landlords. Single-family tenants are less likely to move as they settle into homes that feel better suited for families. Landlords may be able to push the rent lever more aggressively as families try to avoid relocating from friends, schools, communities and work.
Single-family rental tenants also tend to be wealthier than their apartment counterparts, making rent increases easier to swallow.
For tenants, increased flexibility and lower costs are significant benefits of renting rather than buying. The average mortgage payment is 52 percent higher than the monthly rent payment, according to CBRE.
Investors aren’t bullish on short-term rentals’ future, though. Tricon and Invitation Homes have both underperformed against the S&P 500 this year. Additionally, rising interest rates have scared investors away from the home purchases that prop up the single-family rental market. Investor home purchases dropped 30 percent year-over-year in the third quarter, according to Redfin.
— Holden Walter-Warner