Southeast Dominates SFR Strength
Florida and Louisiana are home to the top five single-family rental markets in the country, reported RentRange, Westminster, Colo.
In Florida, the Cape Coral-Fort Myers, Deltona-Daytona Beach-Ormond Beach and North Port-Bradenton-Sarasota markets saw the largest SFR rent hikes nationwide in the fourth quarter, while Louisiana metros Shreveport-Bossier City and New Orleans-Metairie-Kenner also made it into the top five.
Just four southeastern states–Florida, Louisiana, Arkansas and Tennessee–account for eight of the top ten SFR markets, RentRange said.
“The single-family rental market remains strong across the U.S. as the homeownership rate continues to decline and a higher percentage of the population migrates to rental housing,” said RentRange CEO Walter Charnoff.
Charnoff said he sees “significant” rental price increases in many markets as the market continues to improve, “which bodes well for investors in this space.”
The single-family rental market now serves one in eight U.S. households. And Keefe, Bruyette & Woods, New York, recently said it expects earnings to grow for SFR real estate investment trusts, driven by improving occupancy and margins. SFR REITs include Altisource Residential, American Homes 4 Rent, Colony Starwood Homes and Silver Bay.
“For SFR REITs, we expect improvement in occupancy as the pace of lease-ups continues to outpace acquisitions and companies focus on operations,” KBW said. “Additionally, we expect management to comment on the acquisition environment, including mergers and acquisitions and potential future securitizations.”
Charnoff said real estate investors need to consider gross yield–annual income divided by the property’s price not counting operating expenses including property taxes–as well as rental increases. “The gross yield data, which demonstrate income return from an investment prior to operating costs, indicate that markets in the South region are also ripe for investment and account for the highest gross yield percentage returns on the list,” he said.
In the western U.S., where house prices tend to be high, markets across California, Washington and Hawaii occupy nine spots on RentRange’s top twenty-five list. “While the strong growth in rents is encouraging, current price levels in many of these Western markets suppress gross yields as they are consistently among the lowest on the list,” the report said.
The Mortgage Bankers Association will host a Single-Family Rental Finance Workshop in Washington, D.C. on April 7. The one-day conference will examine SFR market dynamics and how loan products are changing to meet demand.
