Generation Rent

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As our group at looks ahead, it’s our ongoing goal and commitment to you to deliver risk-adjusted investment opportunities. To continue to deliver consistent cash-on-cash returns and attractive internal rates of return, we are constantly looking at economic and demographic trends, and aligning our strategy with the markets, asset types, and asset classes that are highly likely to increase in value for the foreseeable future. I wrote an article a few months back about the “build-to-rent” trend happening across the country (if you missed it, drop me an e-mail and I’ll be happy to send you a copy), I feel it’s important to revisit what’s occurring in the single-family home market as it has a direct impact on the performance of multifamily assets.

So, what’s happening?

The median home price reached an all-time high of $363,000 in June 2021, which marks 112 straight months of year-over-year gains.

This value increase is causing an increasing number of Americans to rent for longer, and potentially even in perpetuity. The median home costs between 4.5 – 5x median household income, and, as you can see, is significantly pricier than the run-up to the 2008 housing crash.

Even with mortgage rates at historic lows, many individuals and households are simply priced out of homeownership.

This demographic has loosely been titled, “generation rent” and is largely made up of my fellow millennials, born between 1981 and 1996.

So, who’s buying all these existing homes?

Families, of course. The home ownership rate in Q2 of 21’ sat at just over 65%, so many households are still buying and owning homes. However, it is particularly important to note there is another, perhaps unlikely buyer, gobbling up single-family homes at an unprecedented rate…


In addition to building to rent, many institutional buyers (pension funds, investment firms, and Wall Street banks) are re-allocating large chunks of their portfolio from office parks, shopping malls, and government bonds to single-family homes, which have proved particularly resilient throughout the COVID-19 pandemic, with both values and rents increasing, often in double digits.

Real estate analytics firm Green Street estimates that single-family rental values in the United States are 15% above their pre-COVID-19 level. Renting out single-family homes is expected to deliver annual returns for private investors in the next three years of 6.8%…

While we savvy investors might scoff at 6.8% annual returns, that’s a very attractive yield for institutional buyers who have billions to put to work, with few attractive options at scale.

Now, big institutions can’t get enough of family homes. Earlier this year, funds managed by Invesco Real Estate, one of the world’s largest property investors, gave Mynd $5 billion to buy 20,000 homes in the United States in the next three years on behalf of pension funds.

Mynd is currently buying between 30 and 40 homes a month and wants to increase that to over 1,000, according to Brien.

Invesco isn’t the only big name diving in. In March, Allianz Real Estate and private equity group Centerbridge led a $1.25 billion equity investment in Upward America Venture, a partnership with homebuilder Lennar Corporation, to acquire over $4 billion of new single-family homes for rent in the United States.

According to John Burns Real Estate Consulting, in the first three months of this year, nearly a quarter of all homes sold in the United States were going to investors.

That’s a broad umbrella that covers everything from mega institutions to individuals buying vacation homes, but BlackRock (BLK), JPMorgan Chase (JPM), and Goldman Sachs (GS) were among the big-name buyers.

So, what does this mean for you and us?

The traditional supply and demand equation would dictate that once home values rise to a level where they are unaffordable for a large segment of the population, demand will wane, and prices will decrease. However, with institutions now deploying billions of dollars into the single-family housing market, and more than happy with lower yields, this would seem to point to long-term price appreciation.

And, you guessed it, that means more people, needing quality places to call home, for longer and longer periods of time. High-quality apartments in desirable areas will continue to experience strong demand, and we’re happy to provide that valuable service and happy you’re partnering with us!