Has the increased popularity of the single-family rental market forever changed the way housing reacts to market swings, or is this an unsustainable trend that will eventually precipitate another housing crisis?
Panels of experts discussed this and other issues such as securitization, crowdfunding, property management, and protecting investments from HOA "super-priority liens" in the Single-Family Rental Lab at the 2015 Five Star Conference and Expo Wednesday in Dallas.
While this is the 12th year for the Five Star Conference, it was the first-ever SFR Lab, speaking to the rapidly growing popularity of the SFR market in the last year to two years.
When the panel of four experts debated whether the current single-family rental market is a "bubble" or is here to stay and the question was put to them by Tim Herriage, the lab's director, three of the four experts answered that it was here to stay. That is, three out of four experts believe that investors will be able to sustain the single-family rental market enough to avoid a housing crisis like the one in 2008.
"It's a growing industry with billions in transactions on an annual basis."
"I think when you listen to everyone else, from the Moody's people to the property managers to acquisitions people all the way through, I think the message is that this is an industry that is here to stay," said Herriage, CEO of 2020 REI Companies. "It's a growing industry with billions in transactions on an annual basis."
Those who thought that the single-family rental market is here to stay agreed that the strength of the millennial graphic and their spending power as they get better paying jobs and look to move out of their parents' houses will be a major factor in the growth of the single-family rental market. Currently about 29 percent of the nation's rental stock consists of single-family detached homes.
Aside from millennials, there have been several factors playing into the recent growth of the single-family rental market, according to Herriage.
"When you look at the supply and demand, and the millennial factor, and now the availability of capital markets backing the space, it's going to not only feed new transactions, but with regards to DS News and default servicing, there will end up being opportunities there," Herriage said. "You can't operate on a zero loss. You're going to have defaults, you are going to have servicing issues. Right now look at servicing and the space is wide open. There are a couple of servicers who are willing to service this paper, but for the most part, the big guys haven't gotten in. I think over the next 12 to 18 months you'll see this industry continue to mature and become more mainstream."
The Five Star Institute will host its inaugural Single-Family Rental Summit from October 11 to 13 in Las Vegas.
(Editor's note: The Five Star Institute is the parent company of The MReport and TheMReport.com)