SFR Investment Homes Influencing Housing Recovery

WIFI Research Brief: Single Family Investment Homes Influencing the Recovery

Single-family rentals have become an attractive and viable option for families that vacate foreclosed properties. The Street reports that the families are thankful they need not compromise on their lifestyle and can continue to live in decent neighborhoods. For investors, according to CoreLogic, the average return on single-family home investment is 8.6%. That is just an average! If markets are carefully chosen, with financing, the returns can cross the double-digit mark. It will not be a surprise if the rental income is securitized, as reported by the Wall Street Journal, and bond investors start factoring in the housing market recovery to price non-agency bonds.

Sales of existing homes dropped by 5.4% as it continues to be tough to meet with strict mortgage lending standards, but the Builders confidence is solid with 6.9% increase in housing production in June 2012. This is the highest increase since October  2008.  Single-family housing starts are at a seasonally adjusted annual rate of 539,000 units in June 2012, the highest number since April 2011.

Though the improvement in the employment sector is nothing to get excited about, the US department of Labor released a report showcasing a modest but steady recovery surpassing the recovery of the early 2000s and at par with the recovery of the early 90s. The private sector created 4.4 million jobs mainly in health, education, retail, mining, manufacturing, business, leisure and hospitality sectors. The US auto industry is showing signs of a complete turnaround with 239,000 jobs added since June 2009.

We encourage you to watch Freddie Mac’s just released 1m 20s video justifying why they think housing industry has turned the corner.

HomeUnion® reports interesting happenings in its cash flow zones. The City of Pittsburgh, has announced an “urban forest master plan” to add more foliage to the 2.5 million trees already covering the city. Planetizen reports that the city has more than 2.5 million trees that sequester 13,900 tons of carbon dioxide a year, saved residents $3 million in energy bills and removed 519 tons of pollution saving $3.6 million a year.  Pittsburgh street trees alone diverted 41.8 million gallons of storm water last year. Now, that piece of environment friendly news is something to rejoice about!

For those who are interested in further details, here is a link into the Federal Reserve District Beige book describing the current economic conditions.  In short, the Atlanta, St. Louis, and San Francisco Districts reported modest growth, while Boston, Chicago, Minneapolis, Kansas City, and Dallas described economic activity as advancing moderately.  The New York, Philadelphia, and Cleveland Districts noted that activity continued to expand, but at a slower pace since the last report, while Richmond cited mixed activity.

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