Residential housing is the largest U.S. real estate asset class, with approximately 140 million total housing units and a total value of more than $43.4 billion, according to Zillow.com.
With that benchmark, Landa App LLC, a real estate investment firm, adds that the U.S. single-family rental market has grown in recent years as homeownership rates have declined following the global financial crisis.
Landa App LLC believes this decline in homeownership is due to several factors.
First, consumer mortgage financing is now more difficult to obtain due to conservative mortgage underwriting standards that emerged in the wake of the global financial crisis.
Many Americans have limited credit and lack the liquidity to afford a down payment on a home.
Second, the United States is experiencing a demographic shift away from the desire to own a home.
Americans are seeking more flexibility and mobility in their housing.
Finally, in recent years, home prices have increased faster than wages, creating an affordability issue for prospective homeowners.
These factors have changed the landscape of the U.S. housing market in recent years and have contributed to the increased demand for rental housing.
Residential Housing
Landa App LLC believes that the increase in demand for rental housing has created the institutionalization of single-family property investment.
Prior to 2012, the single-family rental sector consisted primarily of smaller, non-institutional owners and managers; however, in recent years, larger institutional investors have emerged.
Despite this growth, it is estimated that institutional owners only account for approximately 375,000 units or 2.5% of all single-family rental units in the United States, according to Institutional Real Estate, Inc.
The expansion of institutional owners in this asset class has led to management efficiencies and technological development in the industry, which has improved the cost of managing a rental property.
The operating metrics of institutionally managed single-family rentals are now comparable to those of traditional multifamily properties, as single-family rental properties exhibit similar occupancy levels to multifamily properties, with lower turnover rates.
In addition, according to the National Association of Realtors, the single-family market is the most liquid real estate asset class in the United States, with an average of 5.2 million existing home sales per year between 2005 and 2021.
By the end of 2021, the homeownership rate was 65%, down from 69% at its all-time high in 2004, according to a U.S. Census Bureau report.
