The American dream of single-family home ownership, according to certain builders and financial wizards who are paid to know these things, is on the decline. Well, maybe not a decline but certainly a shake-up in the way single-family home living is viewed.
If you haven’t heard of SFRs, which is short for single-family home rentals, don’t feel uninformed since I too just stumbled on it myself. Apparently, while almost everyone was consumed by the escalating single-family home market, the SFR snuck in and is now a hot area in the real estate market. So hot, in fact, that entire communities are being built by enterprising builders comprised of all single-family homes strictly for rent.
The National Association of Home Builders indicate that the $4.4 trillion SFR market is one of the fastest-growing sectors in real estate. They go on to say that single-family built-for-rent homes account for 11% of all single-family home construction in the housing market. This market share is way more than the 3% that was typical over the last several decades.
The demand for single-family rental homes fills a gap on several different levels. With interest rates going up and the price of homes going up, buyers are having a much more difficult time finding a home. So here comes brand new single-family home communities of smart homes with amenities and upgraded fixtures without any of the home ownership hassle. This has a lot of appeal to remote workers who may be transitory and may be more interested in holding on to their cash while still living in a home. Not to mention seniors who have sold their larger properties to cash in on their equity and don’t want to make another financial commitment.
This trend is happening even though rents on single-family homes have risen 10.2% year-over-year through September 2022 due to inflation, per CoreLogic’s single-family rent index. The most recent information is that the median rental cost for a three-bedroom, single-family, detached home is $1,900 per month nationally. Compare this to mortgage payments on a comparable home that have increased 50% since the beginning of the year. Buyers are doing the math and have determined that renting is a lot more cost-effective than owning in today’s market with interest rates double what they were two years ago.
There are a handful of companies around the country that are constructing built-for-rent communities and quite a bit of information is available on the internet about these companies and their homes. In Florida, I did find a few built-to-rent communities in Palmetto, Plant City and Wesley Chapel near Tampa, but so far Florida has not caught the built-to-rent bug on a grand scale.
We all know the benefits of owning your own home – building equity, pride of ownership, freedom to do what you want with your property and the consistency of neighborhoods not always guaranteed in rental communities. However, despite this, buyers are sitting out buying and waiting for what they think will be a single-family correction to the market. Investing their down payment money in high-interest savings accounts and waiting to see if the dust settles on the housing market has become a real development.
Real estate is always dynamic and hard to predict. Every buyer’s family and financial situation is unique so if SFRs works for you this might be the time to dive in. However, you may think interest rates are high, but historically under 7%, where they are now, is a good rate so if that’s the only thing stopping you from buying, think about it. Happy New Year!
