Wall Street Is Squeezing Out First-Time Homebuyers

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https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjevF_bjtS-jnFhYxksMnlSvycbw03KVFIyEpaMob22dgz81VYB_OCS8TjFhsCE50yAgnEWTzB2o-3kAL0W3QjkPK9q35jW_HT98rqKRGtuzwNJ_vAmI4I4rfCTKZEtjwDVXDHNOC-9Bzo/s320/1000x-1.jpgThe rapid growth of the build-to-rent housing industry seems ominous for would-be homebuyers, particularly when the inventory for sale is so low. While the size of the industry is still small relative to the entire U.S. housing market, every little bit counts when rising demand is already pushing prices higher — especially for first-time homebuyers. Now with institutional investors such as KKR & Co. buying up houses to rent, the impact could be felt sooner than appreciated. For a little perspective, there were 64,000 homes built to rent in the U.S. in 2020, up from 37,000 in 2017. That's significant growth in a few years, but in a country with over 80 million owner-occupied housing units, we're still talking about less than 0.1% of the existing stock. 

That's not the whole story, though. The build-to-rent industry is a much bigger percentage of the annual production of new homes. After a decade of reduced construction following the 2008 financial crisis, the housing industry is now building single-family homes at a rate of between 1.1 million and 1.2 million units a year. Take out the 350,000 units or so that are torn down and that's about 800,000 net new single-family homes a year. In that context, 64,000 build-to-rent units is around 8% of annual net new supply — and that share could double by 2024, according to Hunter Housing Economics. It's an even bigger dynamic in the entry-level market — the price points big investors are interested in — in fast-growing metro areas that are attracting a lot of people in search of cheaper places to buy homes. In the June new home sales report, 43% of homes that sold were for over $400,000, 28% were between $300,000 and $399,999 and only 29% sold for under $300,000. The states with the highest share of single-family rentals are fast-growing Sun Belt states like Georgia, Florida and Arizona. A build-to-rent industry producing 100,000 homes a year could end up being 30% of the entry-level construction market in metro areas like Phoenix and Nashville.

 


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