Green Street, a commercial real estate analytics firm, has released a slew of 11 new 2022 Sector Outlooks with in-depth analytics on supply/demand, risks/opportunities, and property valuation trends across markets in the U.S. and found that due to favorable market conditions, single-family rentals (SFRs) will remain en vogue for the foreseeable future.
As of the 2020 Census, there are about 330 million Americans living in 125 million dwelling units. Of these dwellings, about 35% are SFR rentals representing 16 million units.
While SFRs make up a sizeable portion of the housing market, this was not always the case. When comparing SFRs from the current census to the previous census in 2010, this segment of housing has risen by an astonishing 25%.
“Over the next five years, we anticipate demand for approximately 7.5 million additional housing units, 10% above the average annual growth observed over the last ten years,” Green Street said in their outlook. “Approximately 810,000 new households are expected to sign leases for single-family rentals, 1.5 times higher than the number of new apartment renters.”
Green Street expects SFR growth to be highest among older Millennials aged 34 to 44, who happen to be the largest demographic group seeking this type of housing. That isn’t to say other groups are not searching for these homes either—retirees and Boomers looking to downsize, possibly to warmer areas or near resorts, are also searching for these homes.
“Current demographic trends support both single-family ownership and single-family renting,” Green Street said. “While Sun Belt markets have been in the spotlight for future population growth, certain suburban coastal markets should see ample rental demand for single-family homes.”
“The pandemic accelerated homebuying decisions for many U.S. residents, leaving a limited number of homes available for purchase, and driving up prices. Homebuilders have responded to surging demand for housing and are attempting to build more single-family homes, including build-to-rent (BTR) housing. While supply and permitting trends suggest more supply is coming, prices may rise further as bidding tents consist of owner occupants and large institutions trying to grow their respective SFR platforms.”
The pandemic has been a main driver of SFR popularity as of late. The necessity of working from home, which looks to be a trend that is going to stick around, rose as people fled viral hotspots (mainly cities) for the suburbs and beyond seeking larger homes, lower costs of living, and slower paces of life.
So where are these homes located at? The outlook found that the majority of SFRs (both public and private) are in the Sun Belt. Popular states include:
- Georgia – 5.1%
- Florida – 4.2%
- Arizona – 3.7%
- Nevada – 3.3%
- North Carolina – 3.0%