Decrease in New Home Starts Good News for SFR Investors

A Home with a For Rent sign in frontExisting home sales, new home sales, and new home starts have been showing headwinds. Pundits initially attributed this to the harsh winter weather, however it is now obvious that not all of this is climate-related.

The first time home buyers that used to make up over 40% of annual sales are now less than 30% of the total sales. This decrease is caused by the underemployment in the 25-34 segment, as well as rising job uncertainty for Millennials.

While the Millennial generation is leading the trend towards renting a home, other demographic sectors are also beginning to rent their homes rather than buying them. In years past, tight inventory and strict lending standards have contributed the growth of the rental home market.

Overall, according the the U.S. Department of Commerce, as evidenced by the 7.5% increase in new housing starts since June 2013, the inventory situation has indeed improved, and banks do seem to be easing up on lending standards.  However, despite this, the core drivers of home buying remain soft.  This is very good news for single family real estate investors, as the renter population is growing and stable as evidenced by rising rents in many areas of the country.


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