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Analyzing Single-Family Rental Construction

The number of single-family homes built-for-rent declined at the start of 2019, according to the latest data from the National Association of Homebuilders (NAHB) and the Census Bureau. The Census Bureau’s Quarterly Starts and Completions by Purpose and Design report indicates that there were 5,000 single-family built-for-rent starts for the first quarter of 2019, below the 6,000 estimated for the start of 2018. Over the last four quarters, 42,000 such homes began construction.

The NAHB notes that these quarter-to-quarter fluctuations were not statistically significant. The current four-quarter moving average of market share (4.8%) remains higher than the recent historical average of 2.7% (1992-2012) but is down from the 5.8% reading registered at the start of 2013.

Though built-for-rent single-family rentals have been on the decline, the overall single-family rental market has been on the rise. The market for single-family rental (SFR) securitizations continued to grow month over month. It increased to 4.7% in March from 4.2%, according to the latest Morningstar Credit Ratings report on the SFR market.

The report indicated that the average vacancy rate had declined overall to 4% in March—the lowest since May 2018.

The average retention rate for expiring leases also dropped to 78.9% in February, the latest month available, from 80.4% in January.

Looking at single borrower performance, the report found that lease expirations had increased to 6.6% in March, up from 6% in February. Among the securitizations analyzed by Morningstar, AH4R 2015-SFR1 had the highest lease expirations at 8.3%, up from 7.6% in February. On the other hand, PRD 2018-SFR1 had the lowest percentage of lease expirations at 2.7% followed by PRD 2015-SFR3 at 4.4%.

Among the securitized properties, the report said that rent gains from securitized properties in March trailed rent gains for three-bedroom properties. Additionally, the rent change for three-bedroom properties declined slightly to 5.6% from 6% in February. The rent for four-bedroom properties remained unchanged during the period.

Rent growth for vacant-to-occupied properties increased to 3.9% from 2.5%, the report indicated.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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