From the WSJ:
More single-family homes across the nation are being built for renters, a shift that mirrors a steady decline in homeownership in the years since the housing bust.
Until recently, real-estate investors had focused primarily on scooping up tens of thousands of foreclosed homes, at a sharp discount, and converting them into rental properties. Now that the pool of these properties has declined and prices have risen, these investors are snapping up newly finished single-family homes to be used as rentals, or even developing vacant lots from the ground up.
Last year 5.8% of the 535,000 single-family homes started were being built as rentals, up from 4.8% in 2011 and the highest share since at least 1974, according to an analysis of census data by the National Association of Homebuilders. From 1974 to the home-price peak in 2006, only about 2% of single-family homes were built for rentals.’
For investors, the interest in new homes reflects their belief that the rental market will continue to see strong demand and rising rents. While there is little data for the level of single-family home rents, apartment rents have shot up 11.3% since 2009, according to Reis Inc. Overall, about 15 million of the nation’s single-family homes were rentals last year, up from 10.8 million in 2005, according to Zelman & Associates, a research firm.
Landsmith bought about 1,800 existing single-family homes over the past two years but has recently turned to buying new homes. The company has developed or bought about 600 new single-family rentals in Houston, Indianapolis and Charlotte, N.C.
“So you could buy a house from 1990 and get a 12% return. Now you can buy a brand-new house and get a 10% net return, so the spread isn’t that dramatic given the uptick in quality you’re getting,” says Chang Kim, a vice president at Landsmith. “We’re in a unique period where brand-new houses can be built for a low enough cost that single family rentals can work.”