Danielle Nguyen — VP of Research, John Burns Research & Consulting
A Conversation About the State of the Single-Family Rental Industry
For the serious real estate investor, studying and analyzing data is of primary importance to help achieve success through solid and rational decision making. Data takes the emotion out of making decisions. One important caveat is to be careful whose data you are looking at and putting your trust in.
For this discussion, we reached out to a leader in the industry, John Burns Research and Consulting. John Burns Research and Consulting produces independent research and custom consulting advice to help executives make the most informed decisions possible.
REI INK sat down with Danielle Nguyen, Vice President of Research, to discuss the Single-Family Rental Industry and to discuss some insights into what lies ahead.
Danielle, to begin, how about some background on you and how you became the Vice President of Research at John Burns Research & Consulting?
I have been at John Burns Research and Consulting for approximately eight years, starting on the Demographics team—learning the ins and outs of how demographics impact housing. I then transitioned onto our Research team, where I sit today. My main focus areas are our for-sale (new construction) and rental (single-family rental, build-to-rent, and apartments) coverage.
Can you tell us a little about John Burns Research and Consulting and how our readers can get in contact?
John Burns Research and Consulting provides independent research and consulting services related to the U.S. housing industry. We help our clients make informed housing investment decisions based on our market research, knowledge, and experience in the sector.
We service our clients two different ways. First, our Research memberships are full of timely analysis and forward-looking insights—all supported by data to help our clients make the best decisions. And our consulting services provide our clients with customized analysis to help them answer specific questions on topics ranging from developing strategy to acquiring a specific property, community, or company. We have experts strategically placed across the country who know their markets extremely well to be able to guide our clients through important investment decisions.
Your readers may visit www.jbrec.com for more information.
I know your data and reports are proprietary, but can you give us a little insight and directional indicators into the State of the Single-Family Rental industry?
Here are a few important bits of information I can share.
The single-family rental (SFR) industry remains in solid form. SFR rent growth is normalizing in most markets compared to historical long-term averages through January 2024. However, the over-all supply/demand dynamics support continued rent growth in 2024 and beyond—albeit likely less robust than in 2021–2022.
Single-family new lease asking rent growth rose +4% YOY nationally in February 2024. Single-family new lease asking rent growth increased 6%+ YOY in 38 of the top 99 SFR markets we track as of February 2024.
Some markets, like Chattanooga, TN, Knoxville, TN, Savannah, GA, and Lexington, KY, saw +10% YOY single-family asking rent growth in February 2024.
The economy remains strong with solid job growth, a healthy labor market thanks to immigration, and rising incomes year over year—though at a slower pace than year-ago levels. And home prices are rising YOY across most top housing markets, aided by very low resale inventory.
National SFR occupancy trends are in line with the historical average, per the US Census, correlating with healthy but moderating rent growth. Also, for-sale affordability challenges put homeownership out of reach and support demand for SFR through longer tenant retention.
Nationally, the monthly mortgage payment to purchase a typical single-family starter home exceeds the monthly SFR Rent by $1,000+ on a similar home. Saving for a down payment remains the number on financial hurdle for purchasing a home, based on our New Home Trends Institute’s Household Sentiment Survey (March 2024).
Higher borrowing rates and limited for-sale resale housing supply have flowed into tight SFR inventory. This drastically reduces investor home purchases along with higher financing costs (rising cost of capital). With severely limited resale supply, SFR operators look to homebuilders for inventory and building new homes to rent (BTR) to grow their portfolios, according to our 4Q23 SFR Survey.
Overall, we expect resiliency for the SFR industry and for single-family rent growth. National single-family new lease asking rent growth has historically stayed positive even in recessionary periods, compared to home price growth and apartment rent growth.
There has been much press lately portraying the real estate investor as the “bad guy” and being responsible for skyrocketing home prices and locking the little guy out from buying a house. Do you and/or JBREC have any opinions you can share on that?
New and resale home inventory is still near all-time lows. Despite resale inventory ticking up slightly, housing is still undersupplied today — which may prop up home prices. With rates hovering around 7.5%—challenging affordability—many would-be sellers/homeowners may stay in their homes and will likely avoid selling unless necessary.
Investors remain a relatively consistent 23% to 25% of the market, with both investor and owner-occupant activity declining due to rising interest rates (rising cost of capital). Large rental investor groups began selling more homes than they are buying, and small rental investors continued selling as well.
Nationally, institutional investors (1,000+ homes) account for just 3% of total investor-owned SFR homes, with mom-and-pop investors (1–9 homes) owning the majority of SFR homes (80%).
Across the top 20 markets, institutional investors account for 2% (Riverside-San Bernardino, CA, and Austin) to 24% (Atlanta) of all SFR homes within their markets.
