New: 🧠 Market Minds Issue #039

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The Rise of Single-Family Rentals (SFRs): Investment Opportunities & Market Trends

Have you seen an increase in your area of people leaving apartments and moving into single-family homes for rent? A growing movement for sure, Single-Family Rentals (SFRs) have been a hot topic on the lips of many. 

Then, what is causing the change? 

Why Are People Renting Single-Family Homes?

There are a number of reasons behind the change in behavior. For one, there's the need for room. As telecommuting increasingly becomes a way of life for many, folks have come to need more space: room to spread out and work in the home office or perhaps even enough land that they can cultivate their backyard gardens. For one, the average apartment life is not ideal for everybody. For others, a single-family home and the freedom to renovate it in their way seem like sheer heaven. Third, the increasing expense of homeownership is making renting an ever-more popular and even desirable choice.

In other words, SFRs are on the rise and it's easy to see why. And wherever there is demand, investment will follow. A spot to keep an eye on, for sure.

Market Trends to Watch

The SFR market is booming, but it’s not without its challenges. Here are a few trends to keep an eye on:

• Rising Property Values: As single-family houses are in high demand, prices have been pushed up across many areas. The median price of a single-family home in the U.S. increased  by 11.2% over the past year to $416,000

• Tenant Demand: SFRs are hot commodities, but it pays off to know your market. In 2010, about one in eight American households rented single-family homes; by the end of this decade, that ratio had risen to nearly one in seven.

• Interest Rates: Interest rates are a vital consideration when making any real estate investment. Mortgage interest rates are at long-term averages of about 7% today.

• Rental Property Management: Rental Properties Management can be very time-consuming and stressful. Vacant rent properties are at 4%.

Buying a New Home Becoming More Budget-Friendly Than Existing Homes

According to the latest data from the Census and the National Association of Realtors (NAR), the median sales price for newly built homes is currently lower than that for existing homes. This shift in pricing is largely due to builders' responses to market demands. They are increasingly focusing on constructing smaller, more affordable homes to meet the needs of today's buyers. Additionally, with an increased inventory of new homes on the market, builders are motivated to sell their existing stock before adding more, potentially lowering prices further.

Attractive Incentives from Builders

Another significant advantage of opting for a newly built home is the variety of incentives that builders often offer. As reported by HousingWire, the use of sales incentives has increased, with 61% of builders offering some form of incentive in June, up from 59% in May. These incentives can include competitive mortgage rates, which can significantly reduce the long-term costs of buying a home. Builders might also cover closing costs or offer free upgrades, adding substantial value to the purchase.

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The Photos On a Million Dollar Listing…

This Bossier City, LA home made the cut this week because of the remarkable listing photos…

Seriously, on a 1.3M listing? The sad part is, they don’t get any better… 😂

TL;DR (Too Long; Didn’t Read)

Single-Family Rentals (SFRs) are increasingly popular as more people seek the space and flexibility they offer, driven by the rise in telecommuting and the high costs of homeownership. This demand has led to rising property values and a growing rental market, with one in seven American households now renting single-family homes. Investors are capitalizing on this trend, although managing rental properties can be challenging. Meanwhile, newly built homes are becoming more budget-friendly than existing ones, with builders offering various incentives to attract buyers.

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

Cheers 🍻

-Market Minds Team