Take a drive through the urban portion of any major city and you will likely see cranes and construction crews dotting the landscape, building what appears to be an endless supply of apartment units. Your eyes are not deceiving you. Construction in 24 of the top 27 apartment markets in the country has eclipsed 24-year historical averages.
Given the declining national homeownership rate and numerous headwinds preventing entry-level buyers from owning a home, one could quickly assume that apartments are now the primary as well as preferred rental choice. This assumption would be incorrect, however, as single-family rental homes are growing faster than apartments. Consider the following:
- 11.3% of all housing units are single-family rental homes (~1 out of every 9 homes).
- The number of single-family rental homes has increased 35% since 2006, to 15.1 million from 11.2 million in 2006.
- Since 2006, 3.9 million single-family homes have become rental properties, compared to 2.9 million newly created apartment units.
While we expect the rate of single-family rental growth to slow as foreclosures slow, we believe professional operators have a huge opportunity to build an investment-quality income stream out of what used to primarily be a mom and pop business.
Editor's Note: Single-family homes will likely remains one of the best investment options for real estate investors at any level over the next 5-10 years because of demographic shifts and increasing demand.