REI INK

Housing Market and Single-Family Rental Indices

Key Indicators All Showed Improvement in October by David Howard The National Rental Home Council (NRHC) serves as the trade association for the single-family rental (SFR) home industry. NRHC members include owner-operators, builders, vendors, and service providers of single-family rental homes across the country. Our mission is simple: The NRHC works to educate the public about the benefits of SFR homes and advocate for sensible policies that support the single-family rental market. Our aim is to help preserve and strengthen the availability of SFR properties and to support communities by providing a sought-after form of housing. We also provide members with industry-specific educational opportunities, market research, and other tools to guide them through the ever-evolving housing market landscape. In keeping with the Data & Analytics theme of this issue of REI INK, below are three indices which show signs of improvement in both the Single-Family Rental industry and the overall housing market. NAHM/Wells Fargo Housing Market Index According to the National Association of Homebuilders/Wells Fargo Housing Market Index (HMI), US homebuilder sentiment climbed for a second consecutive month to 43 — reaching a four-month high in October. However, sentiment under 50 still implies that homebuilders’ spirits are dampened. The increase was likely driven by optimism over further declines in mortgage rates and receding inflation, which could boost demand for new homes. The HMI exceeded economists’ expectations of 42, according to Bloomberg. Key indicators, including future sales outlook over the next six months, present sales, and buyer traffic, all showed improvement in October. 32% of builders reported cutting prices, while 62% used sales incentives. The average reported reduction was 6%. The index rose in all regions except the South, based on a three-month moving average. The North (51) was the only region above 50. CoreLogic Single-Family Rental Index SFR rents rose 2.4% annually in August 2024, according to the CoreLogic Single-Family Rental Index (SFRI). Meanwhile, measured month-over-month rents declined 0.2%. August’s annual growth rate was the slowest since late 2023. Broadly, renters expect 4.5% rent growth over the next 12 months, according to the Fannie Mae National Housing Survey. Low-tier rents declined by 0.2% — a rarity, as the last low-price tier decline was around the time of the Great Recession. Conversely, high-end rents climbed faster than average at 2.9%. Among the top 20 metropolitan areas tracked by CoreLogic, Seattle (5.8%), New York City (5.5%), and Washington DC (5.5%) led year-over-year rent growth. Sun Belt markets Austin (-2.3%), Phoenix (0.0%), and Orlando (0.2%) lagged behind the rest of the pack. Despite the slowdown, Phoenix and Orlando are still up 38% and 41%, respectively, from four years ago. Fannie Mae’s Home Price Index Fannie Mae reported home prices increased 5.9% over the past year. According to Fannie Mae’s Home Price Index, single-family home prices increased 5.9% from the third quarter of 2023 to the third quarter of 2024, a decline from the previous quarter’s annual increase of 6.4%. Government Affairs California Governor, Gavin Newsom, recently signed legislation impacting rental property owners in the state. Assembly Bill 2493 prohibits property owners from charging prospective tenants a screening fee to applicants not selected for a vacancy; and Assembly Bill 2801 requires property owners to provide photographic evidence of necessary repairs and proof they were completed before accessing security deposit funds. Industry Leaders Conference And in closing, I would like to invite you to join us at NRHC’s Industry Leaders Conference, the single-family rental home industry’s most important annual event. The event will be April 6-9, 2025, in Orlando, FL. Take advantage of the many opportunities to participate and hear from owner-operator executives and other experts in the SFR and BTR communities. Make valuable connections and network with your industry peers during a variety of engaging general sessions and be a part of the discussions on build-to-rent, housing policy initiatives, operational innovations, and advancements in technology.

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Home Seller Profit Margins Drop Slightly in Q3

Typical Margin at 56% as Median Home Price Levels Out by ATTOM Team ATTOM, a leading curator of land, property data, and real estate analytics, released its third-quarter 2024 U.S. Home Sales Report, which shows that homeowners earned a 55.6% profit margin on typical single-family home and condo sales in the United States during the third quarter. That figure was down by small amounts both quarterly and annually, dipping by one percentage point from the second quarter of 2024 and two points from the third quarter of last year. The nationwide investment return ticked downward as home-price spikes that had buoyed the housing market during the Spring of this year flattened out, leaving the U.S. median home value virtually unchanged at about $360,000. While home-seller profits remain historically high, the national margin has declined almost every quarter from a 64% peak hit in 2022. The leveling off of prices during the third quarter also led to typical raw profits for sellers staying about the same, near an all-time high of just under $130,000. “The latest price and profit numbers provided another round of generally good news for homeowners, tempered by a bit of a downside,” said Rob Barber, CEO for ATTOM. “Home values remained at or near record levels around large swaths of the country, keeping seller profits far above historical levels. At the same time, though, the housing market settled down after a big second quarter, which extended a slow fallback in profit margins that started last year. If history is a good guide, the fourth quarter is likely to bring more of the same as the peak buying season ends.” He added that “this is far from a warning sign that the long market boom is ending. But there certainly are forces that could cut either way, especially as affordability remains a challenge for so many potential buyers.” Profit margins slip quarterly in half of U.S. Typical profit margins — the percent difference between median purchase and resale prices — stayed the same or decreased from the second quarter of 2024 to the third quarter of 2024 in 79 (50.6%) of the 156 metropolitan statistical areas around the U.S. with sufficient data to analyze. They were down annually in 112, or 71.8%, of those metros, and down in about the same portion since the second quarter of 2022, when the nationwide return on median-priced home sales peaked at 64.3%. Profit margins have softened over the past year throughout all price segments of the market, from metro areas where home values mostly sit below $250,000 to those where they top $450,000. But the low end of the market has fared a bit better. Typical margins decreased annually in about 60% of the least expensive metro areas compared to about 75% elsewhere. The biggest year-over-year decreases in typical profit margins during the third quarter of 2024 came in the metro areas of:  »            San Francisco, CA (margin down from 84.9% in the third quarter of 2023 to 61.4% in the third quarter of 2024)  »            Punta Gorda, FL (down from 94.1% to 74.4%)  »            Scranton, PA (down from 88.2% to 69.6%)  »            South Bend, IN (down from 77.3% to 59.2%)  »            Hilo, HI (down from 86.5% to 70.5%) Aside from San Francisco, the biggest annual profit-margin decreases in metro areas with a population of at least 1 million in the third quarter of 2024 were in:  »            Austin, TX (typical return down from 44.3% to 33.3%)  »            Honolulu, HI (down from 53.9% to 43.3%)  »            Riverside, CA (down from 78.6% to 69%)  »            Birmingham, AL (down from 52.1% to 42.7%) The biggest annual improvements in returns on investment came in:  »            Trenton, NJ (margin up from 65.5% in the third quarter of 2023 to 87.4% in the third quarter of 2024)  »            Albany, NY (up from 31.8% to 51.6%)  »            Rockford, IL (up from 54.5% to 70.2%)  »            Rochester, NY (up from 66.7% to 81.2%)  »            Evansville, IN (up from 47.2% to 61.7%) Two-thirds of metro markets show returns above 50% Despite the downward trend, returns on investment for median-priced home sales during the third quarter of 2024 still surpassed 50% in 107 of the metro areas analyzed (68.6%). That was down from three quarters of those areas in the third quarter of last year but far above the level of 13% five years ago. The leaders among areas with a population of at least 1 million in the third quarter of this year were:  »            San Jose, CA (typical return of 109.8%)  »            Seattle, WA (90.3%)  »            Providence, RI (84.6%)  »            Miami, FL (83.9%)  »            Grand Rapids, MI (81.9%) The lowest among areas with a population of at least 1 million were in:  »            New Orleans, LA (24.8%)  »            San Antonio, TX (25.1%)  »            Austin, TX (33.3%)  »            Houston, TX (37.3%)  »            Dallas, TX (37.4%) Raw profits remain near record level The raw profit on median-priced home sales nationwide, measured in dollars, slipped 0.9% during the months running from July through September of this year, to $128,700. But it was still up 2.7% from the third quarter of 2023 and remained near the record of $135,000 hit in 2022. Typical raw profits were flat or down quarterly in 74, or 47.4%, of the markets analyzed. Despite the nationwide year-over-year gain, raw profits were the same or down annually in 82, or 52.6% of those metro areas. The biggest year-over-year increases in raw profits on typical sales among metro areas with a population of at least 1 million were in:  »            Rochester, NY (up 24.4%)  »            Cleveland, OH (up 23.5%)  »            Providence, RI (up 18.9%)  »            Chicago, IL (up 18.8%)  »            Cincinnati, OH (up 15%) National median home value stalls in Summer of 2024 Nationwide, the median price of single-family homes and condos rose from the second to the third quarter of 2024 by just 0.2% after spiking 7.4% in the Spring. But it still hit a new record of $360,500, up from $359,900 in the prior three-month period.

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