SFR East 2024: How Economics and Demographics Shape the Rental Market
IMN’s Single Family Rental Forum (East), the cornerstone gathering of the SFR industry, concluded on May 22, 2024, in Miami, FL. Over three days, 1,800 attendees listened to more than 280 speakers discuss all angles of the SFR industry. On the first day of the conference, Arbor’s Tres Seippel, Director, Construction Management, participated in a wide-ranging panel discussion examining economic and demographic forces influencing SFR and build-to-rent (BTR), which also featured Rick Dalton, President of the Dalton Group, Domonic Purviance of the Federal Reserve Bank of Atlanta, Wade McGuinn, CEO of McGuinn Hybrid Homes, and Heather Williams, VP at Willow Bridge Property Company.
Economic Trends
Between March 2022 and July 2023, the Federal Reserve raised interest rates 11 times in an effort to curb inflation. Seippel noted that elevated interest rates coupled with high home prices have pushed homeownership out of reach for many households. “If the down payment was an issue four years ago, it’s even more of an issue today,” he said. “And then you add on top of it the monthly payments.”
Dalton sees reluctance among renters of all generations to transition to homeownership. He added that today’s high-interest rate environment is cutting into housing affordability and questioned when rates will once again be attractive to potential homebuyers.
“There’s a lot of people who think it’s 5.5%,” Seippel said. “People have this weird sense that six is too high without remembering that six is common.”
Purviance contended that interest rate acceptance has been on the rise. “There is a little bit of impression in the market that people are adjusting to where rates are,” said Purviance. “We did see the beginning of the year, demand starting to increase. Now, rates were a little bit lower at the beginning of the year, but I’ve looked at some of the surveys that were done. There is this impression, okay, rates are seven. We’ve adjusted to the reality.”
Seippel, however, countered that interest rates have not as drastically impacted the housing market as many believe. At issue, he said, is low supply, a need BTR is well-positioned to fill.
Purviance agreed: “Even though overall maybe we don’t have enough, we are not building as much inventory and existing supply is low, there are some markets where we may see a buildup in inventory that’ll suppress prices a little bit. So, I think it is a mixed story and I don’t think it’s as clear as everyone thinks it is.”
Generational Trends
The speakers also discussed how SFR communities now attract renters of all ages, from downsizing Baby Boomers to millennials to the oldest members of Generation Z.
“Quite honestly, what we’re seeing is a huge shift with specifically the largest generation which is the millennial generation,” added Williams. “They are savers; they’re preparers; they live under their means. They have money to rent and still travel and start a family.” Cost-conscious millennials have been finding value in single-family rental communities with amenities.
In many regions of the country, single-family rental communities have quickly become starter homes of choice. “People want a convenient lifestyle, not only walking places or a pool, it’s having someone to come out and be on call,” Seippel said. “And maybe it is three to five days to have something repaired, but they’re not doing it themselves. They don’t have to go through and clean the gutters. They don’t have to mow the lawn even. So those things allow boomers and Gen-Z to get out and be with their families and their friends, explore the cities they live in.”
However, amenities are not the only box SFR checks; community is also a key advantage. “You have a very large number of boomers that don’t need all of the amenities,” said Williams. “They just want the simple items so they can have their grandkids come swim at the pool or have a barbecue out in the green space. Then you’ve got your millennials that have to have that social energy vibe and have to feel some connection with the community.”
With BTR construction starts climbing, renters of all generations are gaining more opportunities to enjoy community amenities and build connections close to home.
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