Bluerock continues to believe the residential sector, including the single-family rental and apartment subsectors, are poised to continue their strong performance mainly attributable to:
“The housing shortfall will continue to put upward pressure on single-family home prices,
keep apartment vacancy rates low, and push rents upward”
JOHN CHANG, MARCUS & MILLICHAP
The national housing shortage has worsened since the Great Financial Crisis. According to the National Multifamily Housing Council, overall demographic growth is expected to generate demand for another 3.7 million new rental properties through 2035. As shown below, the late 1970s and early 1980s saw 10 year average housing production at 0.8x population growth, by 2020 the 10-year average housing production had declined to less than 0.4x population growth.
Source: Federal Reserve Economic Data, August 2022
This is worsening with the record household formation driven by the millennial generation. The 72.2 million Americans in the millennial generation will be forced to rent longer than past generations due to the historically high housing prices, providing a strong tailwind for the single-family rental sector. (Marcus & Millichap, Special Report: Housing Affordability)
Source: U.S. Census Bureau, AMH Research
The inefficient amount of housing has pushed single-family rental rate growth and occupancy to near record highs.
Through Q1 2021
U.S. Census Bureau
Through April 2022
DBRS Morningstar
Arbor, Single-Family Rental Investment Trend Reports Q2 2022
The shortage of housing and increased demand for more space, combined with increasing interest rates has driven housing prices to unaffordable levels.
Marcus & Millichap, 3Q 2022 Multifamily National Report / * Through Second Quarter 2022
The estimated minimum annual income to afford a house in the U.S. eclipsed $120,000, a level that more than 73% of households cannot afford.
Marcus & Millichap, 3Q 2022 Multifamily National Report
The difference in monthly payments between renting and homeownership have never been higher surpassing $1,000 per month…
Marcus & Millichap, Special Report: Housing Affordability
…driving strong demand for not only single-family rentals but also apartments. Apartment occupancy is near all-time highs, driving continued rental rate growth.
U.S. Apartments: Rent Change and Occupancy
Axiometrics, Analytics Guide 3Q 2022
The lack of institutionalization in the single-family rental sector (approximately 2% institutional ownership) provides a significant opportunity for institutional investors to scale in this sector.
Morgan Stanley Research
The national housing shortage, when combined with record household formation and unaffordable home prices has created record highs for occupancy in single-family rental and apartment units, leading to historic year-over-year rental growth. These factors and the lack of institutionalization in the single-family rental sector support a strong thesis for investment in the residential sector.
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