New: 🧠 Market Minds Issue #025

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Build-to-Rent Gaining Traction

According to a new report from RentCafe, a total of 27,500 build-to-rent houses were completed in 2023, marking a significant increase of 75% from the previous year.

The report also reveals that there are currently 45,400 build-to-rent houses under construction, indicating another promising year for the sector.

According to the RentCafe report, the markets with the highest build-to-rent activity in 2023 were those that experienced significant spikes in demand following the pandemic. The top markets for build-to-rent homes in 2023 were:

1. Phoenix: Over 4,000 build-to-rent units completed in 2023

2. Dallas: 2,694 build-to-rent units completed in 2023

3. Atlanta: 1,981 build-to-rent units completed in 2023

4. Austin: 840 new build-to-rent units completed in 2023

5. Charlotte: 714 new build-to-rent units completed in 2023

Why Are Prices Increasing With Sales Decreasing?

The equilibrium between supply and demand shifted after November 2022, leading to a situation where prices are still increasing despite the low sales numbers.

According to Logan Mohtashami, a housing market expert, one positive reason for the low inventory is that homeowners have strong financials and are not being forced to sell their homes due to financial stress. This is a result of the qualified mortgage rule of 2010, which has had a significant impact on the housing market and the overall U.S. economy.

Builders Pumping The Brakes

Building Permits

According to the U.S. Census Bureau, building permits issued in March increased to 1,458,000 at a seasonally adjusted annual rate (SAAR). This represents a 4.3% decrease from the revised February rate but is 1.5% higher than the same period last year.

Housing Starts

Housing starts, on the other hand, experienced a decline in March. The U.S. Census Bureau reported that housing starts reached 1,321,000 at a SAAR, which is a 14.7% decrease from the revised February estimate and a 4.3% decrease compared to the previous year.

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TL;DR (Too Long; Didn’t Read)

Build-to-rent housing saw a significant surge in completion rates in 2023, with 27,500 units finished, a 75% increase from the previous year. The sector remains robust, with 45,400 units currently under construction, driven by high demand in markets such as Phoenix, Dallas, and Atlanta. Despite low sales, housing prices continue to rise due to a shift in supply-demand equilibrium, while builders appear to be cautious as building permits increase but housing starts decline, indicating potential challenges ahead for the housing market.

Have a great weekend - we’ll see you next Saturday.

Cheers 🍻

-Market Minds Team