Bluerock’s Q3 2022 Market Insights Newsletter

Extreme affordability gap emphasizes multifamily appeal. Prior to the mortgage rate jump, homebuying was mostly constrained by the limited for-sale inventory. Now, more homes are being listed, but fewer are selling. Much of the housing demand is funneling to the rental market, resulting in very tight vacancy and historic rent growth. The average effective rental rate in the U.S. grew almost 17 percent year-over-year in the second quarter of 2022. Despite this leap, apartments remain a markedly less-costly option than home ownership. The affordability gap in the U.S., or the difference between an average monthly mortgage payment on a median priced home compared to an average rent obligation, was about $280 before the pandemic. At the end of 2020, it was roughly $375. Halfway through 2022, the gap is a striking $1,000. As a result of this elevation, the estimated minimum annual income to afford a house in the U.S. eclipsed $120,000 in June, a threshold that 73-plus percent of households cannot afford. By comparison, that average was close to 50 percent between 2010 and 2019.

Industrial landlords hold all the cards in an environment of such space scarcity, and most adjustments made to new lease terms are to keep up with the momentum of the market.

We’re pretty confident that we won’t see any drastic dip in `{`SFR`}` rental prices over the rest of 2022, There’s an imbalance between supply and demand, so landlords, including institutional investors, they still have the power to determine the prices right now.

Clearly, there is a market opportunity for products that offer something between the long-term lockups of institutionally oriented structures and the daily liquidity of most stock and bond funds.