TJ Moore, president at ECM Development based in Arlington, Texas, told FOX Business’ Lydia Hu on Thursday that alternative asset classes now available for people to invest in have contributed to the boom.
According to Moore, the increased interest for the home rental market from millennials and retirees comes as some can’t afford a down payment or are simply not interested in investing in homeownership, Hu reported on "Varney & Co." on Thursday.
Hu noted that all 16 new homes in a neighborhood built by ECM Development in Dallas that became available for rent on July 1 have already been claimed.
She reported that homes being built in communities for rent instead of sale is "a growing trend" in the Sun Belt region, and they typically come with amenities usually available when renting apartments, including cable and internet as well as trash disposal.
Homeownership is unaffordable for average wage earners in 55% of U.S. counties, up from 43% a year earlier, according to Attom Data Solutions, a real-estate analytics firm. Meanwhile, single-family landlords have reported record occupancy and fast-rising rents since the pandemic began.
Individuals, family offices and pension funds are among those pouring billions of dollars into build-to-rent projects, The Wall Street Journal reported. In addition, builders are embracing the business of selling homes wholesale to landlords, with some teaming up with them to build the neighborhoods that blur the line between homes and apartment complexes.
The real estate market continues to notch what experts are characterizing as unprecedented levels of price growth, after another month of gains was recorded in May.
May’s home price growth rate overtook April’s at an annualized pace of nearly 18%, compared with 14.8% the month prior, according to a new report from data analytics firm Black Knight.
May marks the third consecutive month that the growth rate for home prices hit an all-time high.
Early data the firm is tracking from June suggests further growth is likely.
"Frankly, home values are appreciating at rates we’ve simply never seen before, as low-interest rates, ultra-scarce inventory and increasingly competitive homebuyers combine to create a truly unprecedented market," Black Knight’s Data & Analytics President Ben Graboske said in a statement.
May’s 2.1% monthly increase in home prices is also the largest monthly increase ever.
Graboske noted that price appreciation has been widespread and recorded in each of the nation’s 100 largest metro areas.
The average U.S. home is up more than $33,000 – or 10% – in the first five months of the year and $63,000 since the beginning of the pandemic, Black Knight said.
Limited inventory has contributed to rising prices, while remote work flexibility has also allowed some workers the ability to leave densely populated metro areas in search of homes in the suburbs.
The median price of homes sold in the first quarter of 2021 was $347,500, according to the St. Louis Federal Reserve. Average prices – as opposed to median prices – were notably higher in the Northeast at $603,700 and West at $504,400 during the same time period.
Currently, homes built for rent make up a little more than 6% of new homes built in the U.S. every year, The Wall Street Journal reported, citing data from Hunter Housing Economics, a real estate consulting firm. The newspaper noted that the firm projects the number of these rental homes built annually will double by 2024.
The build-to-rent boom reportedly was sparked a couple of years ago when landlords who soaked up the flood of cheap foreclosures during the housing crisis were looking for ways to profit.
FOX Business’ Brittany De Lea contributed to this report.