Investors Take Note That Rental Demand Is Up For Single-Family Homes
DAVID GREENE, HOST:
After the housing crisis here in the United States, people were pretty afraid to buy homes, and so demand for rentals really shot up. We're still seeing the impact of that. Just look at census data. It shows vacancy rates for rental units reached an all-time low this summer. But the demand isn't just for apartments. More people now want to rent single family homes. From member station KJZZ in Phoenix, Carrie Jung reports that this is changing the way some real estate investors are working the market.
CARRIE JUNG, BYLINE: Elizabeth Rogers moved to the Phoenix suburb of Chandler a little over a year ago.
ELIZABETH ROGERS: Well, I actually moved here from upstate New York. So I had owned a house for over 20 years there.
JUNG: Today, she's a renter. And for now, a tan, two-bedroom stucco house is home. Rogers likes her granite countertops, and her pug and dachshund have taken a particular liking to the gravel backyard. But Rogers' favorite part of the property is that her unit stands by itself.
ROGERS: I'm probably at the age where the noise and the distraction of people above or below or next to is more of an annoyance.
JUNG: The biggest reason Rogers decided to rent instead of buy a home is financial flexibility.
ROGERS: I wasn't sure what direction my life was going to go in when I moved here as far as how long I was going to be here. So renting was the best option.
JUNG: And Rogers isn't alone. Demand for single-family home leases is strong right now. According to the U.S. Census Bureau, renter-occupied single-family homes across the nation increased about 14 percent in recent years to just over 11 million. And investors have taken notice. Michael Orr is a real estate analyst at Arizona State University.
MICHAEL ORR: We've been through a lot of phases over the last few years. The recovery is now complete, but we've ended up with a lot of people wanting low-end homes.
JUNG: He says first-time homebuyer demand is still lower than it was before the recession. But that doesn't mean nobody's buying. Private equity firms and real estate investment trusts are starting to buy up more houses. This trend started just after the housing crisis, when cheaper homes were easy to find. But now, the housing market in the Phoenix area is returning to pre-recession conditions.
ORR: It's very hard to find a bargain below about $250,000. So, you know, and a landlord wants to buy a home at the lowest possible price and then rent it out for the highest possible rate.
JUNG: Shrinking profit margins haven't deterred investors hoping to get into the single-family home rental market. Some companies are now working directly with builders. It's happening in suburban Atlanta and Reno, Nev. Phoenix area real estate developer NexMetro is about to finish its third community with single-family homes for lease. Josh Hartmann is the company's executive vice president.
JOSH HARTMANN: Part of our business plan is to go into one market per year. So right now, I'm flying up to Denver, looking at places in Denver. We're looking at Atlanta.
JUNG: By working directly with a builder, investors can have more control over the cost of materials. But Hartmann adds the neighborhood concept has other benefits, too.
HARTMANN: What we're doing is putting 120 to 150 units - brand-new - in one location. And so our maintenance costs are a lot lower.
JUNG: Back in suburban Phoenix, renter Elizabeth Rogers pours herself a glass of wine after work. She says, after over a year in the valley, she doesn't regret her decision not to buy a home because she's actually planning a move to Florida.
But still jumping to another house as opposed to an apartment unit or something?
ROGERS: Absolutely (laughter). Absolutely. I wouldn't be so free to make such another big change if I had got into owning a house right away.
JUNG: She says renting means flexibility. For Rogers, like many other renters today, being locked into homeownership would only hold her back. For NPR News, I'm Carrie Jung in Phoenix.