Taylor Morrison, in a partnership with Christopher Todd Communities, has announced that it will be building a single-family, rent-only communities in Arizona. CNBC reports that these companies will be building homes aimed at selling to investors.
Other companies, including Lennar and Toll Brothers have recently started building homes for rent. Lennar sells its properties to investors, while Toll plans to hold the properties in partnerships.
Though the initial plan is to sell to investors, Taylor Morrison CEO Sheryl Palmer told CNBC that they will consider other options in the future.
“We’ll determine the right time in the lease-up process to sell the assets. There is plenty of money out there, so we could look at a REIT or private investors, but our intent will be to divest in a pretty timely fashion,” said Palmer. “As we look at the best way to optimize price and returns, it might be to do something on our own and create our own fund or REIT, but sell them out of the Taylor Morrison land portfolio.”
As home prices increase, the single-family rental market has been expanding. According to Palmer, half of Christopher Todd’s current tenants are millennials and half are baby boomers, according to Palmer.
“The profile of consumers in Christopher Todd shows that these are not people who can’t afford to buy, they choose not to buy,” she said.
Data from CoreLogic also indicates that single-family rentals are increasing. CoreLogic’s Single-Family Rent (SFR) Index increased 4.1% since January 2018, according to CoreLogic’s 2018 SFR report, noting that low rental home inventory, relative to demand is fueling the growth of single-family rent prices.
“Single-family rentals make up one-half of all residential rentals but are an overlooked segment of the housing market,” said CoreLogic Principal Economist Molly Boesel. “Much like the rest of the housing market, single family rentals are affected by market forces and fell rapidly during the Great Recession. They have since bounced back strongly from their low point in 2010, mirroring house price growth.”