According to NAHB, there are more single-family homes being built for rent in the U.S. Find out why!
There has been an increase in the construction of built-for-rent single-family homes in the United States, largely due to the housing affordability crisis, according to the National Association of Home Builders (NAHB). In the first quarter of 2024, about 18,000 single-family homes, destined for rental, began constructing, marking a 20% increase from the first quarter of 2023, based on NAHB’s analysis of U.S. Census Bureau data.
“When mortgage rates move higher, and it’s harder to buy a home, renting becomes more of an option”, said Robert Dietz, chief economist at the NAHB.
“People need a place to live and must choose between buying and renting. If they can’t find what they need in the for-sale market, they turn to the rental market”, said Molly Boesel, principal economist at CoreLogic, a real estate data firm.
“We are seeing this growing move towards having built-for-rent properties in the U.S.”, said Jessica Lautz, deputy chief economist at the NAR. This trend is driven by demand from “people who can’t afford today’s very expensive, out-of-reach housing market”, she added.
Homebuyer affordability dropped in April, as reported by the Mortgage Bankers Association’s Purchase Applications Payment Index. Dietz mentioned that builders are seeing more renters in their 30s and 40s, reflecting a growing interest among young adults in built-for-rent homes “as a growing share who can’t afford to purchase a home today”, Lautz pointed.
Due to the lack of homes for sale “potential buyers either can’t find what they’re looking for or it’s too expensive”, Boesel said. In addition to that, mortgage rates are near 7%, leading to monthly mortgage payments being high, “keeping a lot of potential buyers in rentals”, she added.
“And if they’re at the stage of life where they would rather be in a single-family home, a detached single-family home is going to be the next best thing”, she said.
Rent or Buy?
The national median mortgage payment for purchase applicants was $2,256 in April, an increase of $55 from March and $144 from a year ago, representing a 6.8% increase, according to the Mortgage Bankers Association.
Mortgage payments depend on various factors, including the size of the down payment and the interest rate. Homeowners also deal with additional costs, such as maintenance, repairs, taxes, and insurance.
When considering your options, it is important to create a realistic budget and think about how long you plan to stay in the home and whether it will meet your future needs, Lautz advised. For single-family home renters, it’s crucial to understand all expenses and responsibilities, said Dietz. Additionally, he advises renters to clarify who is responsible for property upkeep.