The decline in homeownership hasn't put a dent in the single-family rental market--if anything, that decline is helping the sector.
Institutional investment in single-family rentals has gathered steam since the Great Recession, when foreclosed homes were sold in bulk auctions by government agencies and banks. That crisis was an opportunity: While homeownership was falling, the need for single-family homes stayed constant, even though households were now signing a lease rather than a mortgage.
“They have not left single-family living, they have left homeownership. We just have not seen the tremendous influx into the multifamily sphere,” says Matt Vance, economist at CBRE Econometric Advisors.
As a result, institutional investors can still find attractive opportunities for single-family rental acquisitions in pockets of the country. "There are plenty of secondary and tertiary markets with room for pricing to grow,” Vance says.
As the homeownership rate continues to fall--experts believe it will bottom out in 2018--the opportunity grows.
“... The outlook for near-term rental household formation and subsequent demand for single-family rentals is favorable. In the long-run, a reversal in the homeownership rate is a negative for single-family rentals relative to apartments,” says John Pawlowski, senior associate at Newport Beach, Calif.-based real estate research firm Green Street Advisors.