Bluerock believes the residential sector, including the single-family rental and apartment subsectors, are poised to continue their strong performance largely attributable to:
Shortage of housing and rental units
Robust household formation, leading to record high occupancy rates and rental rate growth
Unaffordable home prices
“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
Shortage of Housing and Rental Units
A decade of undersupply has left housing inventories at an all-time low…
Trailing 12-Months Average National Existing For-Sale Home Inventory
Source: National Association of Realtors, July 2021
Existing home inventory ~50% below long-term average levels as of July 2021
…which has substantially driven single-family rental demand to nearly 17 million units.
Source: JCHS tabulations of BLS, Consumer Price Indexes, 2021
The high demand has pushed single-family rental and apartment occupancy
and rent growth to record levels
SFR and Apartment YOY Asking Rent Growth
Source: Green Street Residential Sector Update, March 2022
The 2021 surge in single-family rentals coincide with a historic rise in home property values. According to the S&P/Case-Shiller Home U.S. National Home Price Index, annual home price appreciation for 2021 was greater than 17%.
Source: St. Louis FRED, December 2021
Robust Household Formation, Leading to
Record High Occupancy Rates and Rental Rate Growth
The current housing shortage is viewed as a constraint on future growth,
while household formation is constrained by housing availability…
The severity of the housing shortfall has advanced to a point where it is constraining household formations, an impediment to economic growth.
Source: Marcus & Millichap, Multifamily National Investment Forecast, 2022
Unaffordable Home Prices
Renting continues to be the more affordable option when comparing
monthly rent payments to home payments
MONTHLY HOMEOWNERSHIP COST VS MONTHLY RENT COST
$700+
2000
-$6
2012
$300+
JUNE 2021
Source: Marcus & Millichap, The Five Things Every Multifamily Investor Needs To Consider This Year, June 2021
This unaffordability has created an imbalance of apartment supply and demand,
with demand outpacing supply by more than 600,000 units
Cumulative Supply and Demand Since 2010
Source: Axiometrics, Q4 2021
The shortage of more than 600,000 apartment units has pushed occupancy rates to an all-time high of nearly 98% and annual rental rate growth of more than 14% in 2021.
U.S. Apartment Occupancy Rate
Share of total rental stock that is occupied
Source: Axiometrics, Q4 2021
The housing shortage and unaffordable home prices, coupled with strong household formation, have driven apartment and single-family occupancy rates to unprecedented highs, in turn driving rental rate growth to record levels, making a strong case for an investment in rental housing.