High home equity is opportunity for home rental market

Consumers fleeing COVID-19 is an additional driver
(Photo: Tom Rumble, Unsplash)

The real estate market stayed hot this summer, but we could see a swell of homeowners turning to the rental market as house-rich sellers try to take advantage of equity in their homes, according to Realtor.

The real estate website reported that Americans who have been furloughed or laid off and are finding it harder to make mortgage payments may try to sell their homes while prices are high. However, inventory is low, and the real estate market has been marked by bidding wars over the past few months.

Ryan Dezember noted that relief measures passed during the pandemic have prevented people from being kicked out of their homes, but the Mortgage Bankers Association found that 7% of homeowners have a mortgage in forbearance.

“The most house-hungry of these investors are the rental companies formed a decade ago to gobble up foreclosed homes by the thousands,” Dezember wrote. “They were expanding before the pandemic, wagering on a permanent suburban rental class. The economic distress brought by the lockdown has only made investors more excited about such companies’ prospects.”

Related: The rise of the renter—How single-family rentals are gaining ground

David Singelyn, American Homes 4 Rent’s chief executive officer, said that demand for the company’s luxury rental homes has “never been higher” than it was this summer.

“The COVID-19 crisis shined a light on the benefits of our homes as people are moving from high-density city living to single-family suburban communities. Amid this changing landscape, we are executing on our growth programs, including our proprietary AMH Development pipeline, to deliver additional housing in our high-growth markets,” Singelyn said in the company’s Q2 earnings statement.

The National Association of Home Builders found the flight to the suburbs is real, and some people may be jumping into the rental market as a way to get out of high-density urban areas quickly. NAHB’s Q2 Home Building Geography Index found that small metro suburbs were the fastest growing area for single-family construction in the second quarter, increasing 10.6% over the four-quarter moving average and 2.3% year over year.

“This was the only geographic region that experienced a year-over-year increase, with other regional declines correlated with population density,” Litic Murali, an economist for NAHB, wrote in a blog post.

Danielle Andrus

Danielle Andrus was previously the managing editor for Colorado Builder, and is currently Editor for the Journal of Financial Planning.

Danielle Andrus has 341 posts and counting. See all posts by Danielle Andrus

Leave a Reply