The institutional investment in single-family rental (SFR) homes is on the increase and is anticipated to grow significantly over the next eight years, according to Yardi's most recent bulletin. They explain that institutional purchases of SFRs in communities with 50 or more units increased dramatically to $2.5 billion in 2021. However, as interest rates rise, investors must now consider the best methods for expanding portfolios.
According to Yardi analysts, "Rising home and mortgage costs in the second quarter of 2022 increased the cost of capital for institutional buyers, so the segment's growth is likely to slow and returns will moderate. Even so, the industry benefits from strong long-term demand drivers and the explosive growth in institutional capital."
Approximately 5% of the 14 million SFRs nationwide, or 700,000 SFRs, are expected to be owned by institutions in 2022, according to MetLife Investment Management's most recent study. By 2030, when there will be 7.6 million SFRs, it is predicted that institutions will own more than 40% of all SFRs.
Currently, build-to-rent (BTR) or purchasing portfolios from small owners are the main strategies for portfolio growth. Over 25,000 units are currently being built, 4,300 of which will be finished in the first half of 2022, putting the industry on course to produce more units than any year before. 7,705 was the peak set last year.
Inventory of single-family houses in the Denver metro region grew to 8,125, a 10% rise. The number of condos, townhomes, and condos in the metro area increased by more than 11% to 2,048.
At the state level, the number of single-family homes for sale increased to over 15,000, an increase of 8.7%, while the number of condos, apartments, and townhomes for sale increased to 3,520, an increase of 9.4% since June.
Along with information on completed apartments, builders, and owners are also shared in the new bulletin. Dallas has 2,234 and Charlotte has 1,426 of the 5,254 single-family units currently under development. NexMetro Communities is in the process of building 1,702, followed by Redwood Living with 1,659, who has 2,757 homes under development.
