Single-Family Rental Market Moves Toward the Middle

The rapidly maturing single-family rental market is “moving toward the middle,” said ATTOM Data Solutions, Irvine, Calif.

In the ATTOM The Rising ‘Big Middle’ of Single-Family Rentals report, ATTOM Senior Vice President Daren Blomquist noted the “mom-and-pop” investor that owns one or two single-family rentals remains the SFR market’s biggest segment–both in the number of properties owned and the number of investors.

But that segment is shrinking, Blomquist said. Mom-and-pop investors owning one or two properties accounted for 13.1 million of the nearly 19.5 million single-family rentals nationwide, down from 15.2 million homes accounting for 79 percent of the overall SFR market in February–a 15 percent decline in market share.

“Meanwhile, segments of the market represented by investors owning more than two rental homes have all increased from February to November,” Blomquist said. He noted investors owning between six and 10 rental homes saw their market share grow 65 percent and investors owning 100 or more rental homes saw their market share market increase 59 percent.

Morningstar Credit Ratings, New York, said the average single-family rental vacancy rate remained stable at 5.9 percent in October and rents rose 2.9 percent. The average retention rate on full-term leases increased slightly to a “strong” 76.3 percent in September–the latest data available–from a revised 74.6 percent in August.

The average single-family rental delinquency rate increased slightly to 0.9 percent in October, Morningstar said.

Online real estate investment firm HomeUnion, Irvine, Calif., analyzed investor migration patterns and preferences since early 2016 to find the hottest SFR investment housing markets.

Metros located in the Midwest dominate the top 10 list, with Chicago capturing the top spot, said HomeUnion Research Director Steve Hovland, noting the number of Chicagoland home sales for investment purposes jumped more than 30 percentage points from 2016 to now as more than half of single-family transactions had absentee owners. Columbus, Ohio saw an 18.1 percentage point increase in investment home sales, he said.

Hovland noted other Midwest real estate markets including Cincinnati, Indianapolis and Milwaukee also ranked highly. “Rental properties in these metros are trading at a faster rate than before as their local economies continue to grow, the cost of living is lower than it is in most coastal metros and median local incomes are keeping pace with home values,” he said.