By Roland Murphy for AZBEX
A May special report from Northmarq shows the U.S. Build-to-Rent market continues to mature. The paces of building and construction are increasing; performance at existing properties is growing stronger, and there are now more than 500 BTR projects spanning more than 20 states.
Completions of single-family rental homes were up 5% in 2021, and starts increased by 20%. “Renters by Choice” continue to be a key demographic, particularly after the market saw increased publicity during the pandemic and its associated drive for less-dense living accommodations.
As home prices maintain historically high levels and interest rates continue to rise, the already difficult transition from renting to owning will continue to become even harder for many existing renters. The report finds, “While it is likely too early in the cycle to show an impact of rising mortgage rates on single-family for-sale prices, the expectation is prices will likely remain elevated—at least in the short term—and particularly for entry level housing options. The limited inventory of for-sale homes and the continued activity by all-cash or low leverage investors is expected to keep competition – and pricing – elevated in for-sale homes.”
Many of the markets experiencing the highest rates of home purchase price acceleration – including Phoenix – have also been leaders in the development of new Build-to-Rent units.
Nationwide, BTR starts have accelerated from 43,000 units in 2017-2019 to 49,000 in 2020 and 60,000 in 2021. Reflecting the building difficulties facing every aspect of the construction industry, completions have not maintained an equivalent pace. Still, 53,000 BTR units were delivered in 2021, a 5% increase over 2020.
On the investment and ownership side of the equation, Q4 2021 saw record sales velocity, hitting almost the same total as all of 2020. Total BTR property sales in 2021 reached $2.3B, more than double to total for 2020. Along with the increase in sales has been an increase in per unit prices. The median price/unit in 2020 was slightly more than $250K. By Q4 2021, the median price reached $360K, and approximately one-third of sales exceeded $400K/unit.