Why Are Build To Rent Homes Rising, US Added Nearly 600,000 Super Commuters

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Build-to-Rent Homes Report 2024 link

• Build-to-rent (BTR) homes have grown significantly, with a 102% rise in starts since 2019, although there was a 5% decline from 2022 due to stricter financing. In 2023, 112,920 BTR homes were initiated in the U.S.

• Affordability drives the BTR market, with renting being cheaper than buying in 90% of major cities. Millennials and Gen Z are the primary demographics driving this demand.

• Phoenix leads the market with 4,030 BTR completions in 2023, followed by Dallas and Atlanta. Orlando completed 100% of its five-year BTR projects in 2023.

• Investment in BTR homes is seen as a secure bet, given the consistent rental income and high demand. Developers are increasingly focusing on amenities and community features to attract tenants.

• BTR developments are particularly appealing in regions with high housing costs and low inventory. The Southeast and Southwest U.S. are hotspots for these projects.

• Financing remains a challenge, with rising interest rates impacting project feasibility. However, investor interest remains strong due to the sector’s resilience and growth potential.

Moderating Home Prices in Texas Could Signal Trend in Sun Belt Region link

• Texas cities like El Paso and Dallas show signs of home price moderation, with overvaluation percentages of 24.2% and 22.17% respectively. This is lower compared to other Sun Belt cities where premiums exceed 30%.

• Real estate experts suggest that Texas could lead the trend of cooling home prices in the Sun Belt, potentially providing better buying opportunities. Historical pricing trends support this shift towards moderation.

• Seventeen of the twenty most overvalued housing markets in the U.S. are in Sun Belt states, indicating a widespread issue. However, Texas's easing prices might signal broader regional changes ahead.

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Multifamily Investment Market Shows Improvement link

• The Freddie Mac Multifamily Apartment Investment Market Index (AIMI) for Q1 2024 increased by 8.7%, reaching 112.5. This rise reversed the previous quarter's decline and indicates a favorable environment for multifamily investments.

• A 56 basis point drop in mortgage rates, the largest since 2010, contributed significantly to this improvement. Lower property prices and growing net operating income also played crucial roles.

• For the year, the AIMI rose by 8.1%, reflecting broader market stability. This trend suggests potential continued growth in the multifamily sector despite economic uncertainties.

Commercial/Multifamily Mortgage Debt Rises by $40.1 Billion in Q1 2024 link

• Total commercial/multifamily mortgage debt outstanding rose to $4.70 trillion at the end of Q1 2024. Multifamily mortgage debt alone increased by $23.7 billion to reach $2.10 trillion.

• Commercial banks hold the largest share of these mortgages at $1.8 trillion, or 38% of the total. Agency and GSE portfolios follow, holding 22% of the market, which equates to $1.01 trillion.

• Life insurance companies and CMBS/CDO/ABS issues also saw increases in their holdings, with $720 billion and $604 billion respectively. The rise in debt comes despite slow mortgage originations, as fewer loans were paid off through sales or refinancing.

The US Added Nearly 600,000 Super Commuters link

• The number of "super commuters" who travel 90 minutes or more to work has increased by nearly 600,000. This rise is partly driven by affordable housing being located farther from urban job centers.

• Metro areas like New York, Los Angeles, and San Francisco have seen significant increases in super commuters. High housing costs in these cities push workers to live farther away.

• The trend suggests a growing disconnect between job locations and affordable living areas. This could have long-term impacts on urban planning and public transportation systems.

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That's all, folks.

Cheers,

Vidit

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