The Census recently released second quarter starts data, and as expected, we continue to see a pullback in the single-family market. Overall housing starts continue to decline with single-family starts back to 2019 levels. Overall permitting activity is down about 5% YoY, but single-family permitting has sunk below 2018 levels, down nearly 20% YoY. While housing is broadly down, multifamily permits and starts remain strong, particularly for single-family for rent/built-to-rent (SFR/BTR) communities.
Robert Dietz, the Chief Economist with the National Association of Home Builders, recently delved into SFR/BTR starts, found here. External Link
Some Key Takeaways:
- There were approximately 21,000 SFR/BTR starts in the second quarter, a 91% increase over 21Q2. Over the past year, nearly 70,000 SFR/BTR units were started, which was a 60% increase over the prior year.
- The current four-quarter moving average of market share (6%) is higher than the historical average of 2.7% (1992-2012).
- This analysis only captures homes built and held by the original developer for rental purposes, so it is undercounting the overall share of SFR/BTR starts by around 5% according to NAHB estimates.
Why this data matters:
- While SFR/BTR isn’t the right fit in every situation, developers and investors are clearly interested in the product type, meaning we’ll start to see more assets trade as these units approach stabilization.
- We’ve documented some of the drivers of the SFR/BTR surge in previous weekly updates, but with rising mortgage rates and prices, many would-be homebuyers still want to move into a house, but might now not be able to afford it, making SFR/BTR a compelling option.
- The median mortgage payment is up more than 50% YoY, while rents are up a little over 10%.