Single-Family Landlord Sees Jump in Demand for Suburban Homes

By Hadassa Kalatizadeh

While the pandemic has been less than kind to many real estate sectors, it seems to have led to a jump in demand for suburban single-family homes.

As per Crain’s NY, the shift was reported by American Homes 4 Rent, a landlord which owns over 53,000 rental houses. The single-family landlord stated that same-home occupancy reached about 98 percent at the close of last year, benefiting from record demand to raise rents when one household moved out and new tenants came in. Rental rates increased 7.6 percent on new leases in the fourth quarter, as per a statement on Thursday.

The pandemic led people fleeing out of big city buildings in favor of more rural settings with more personal and backyard space. This created demand for the purchase of homes in the suburbs, to the point where inventory became scarce and prices jumped higher. Single-family rentals gained speed as well, especially since there is no need to put out a down payment, and suburban real estate prices have increased for buyers. Institutional investors are also fueling demand for single-family rentals, by shifting to favor the asset in 2020, as the pandemic beat down on traditional commercial real estate holdings including offices and hotels.

“Demand for single-family rentals is as strong as I’ve ever seen it, and the reality is that it keeps getting stronger and stronger,” David Singelyn, chief executive of American Homes, said in an interview. “What excites me more than what happened in 2020 is looking forward to 2021 and future years.”

American Homes, based in Agoura Hills, California, specializes in developing communities of rental homes. The firm is expecting that core funds from operations will increase 7.8 percent this year. That jump, if realized, is likely to place the firm’s performance at the top of the industry, when other publicly listed landlords report earnings, said Jeffrey Langbaum, an analyst at Bloomberg Intelligence. Singelyn said that the company spent last year buying more land to meet demand and develop more homes to add to its portfolio.

That is as long as the demand for single-family suburban homes continues. The question is whether the trend will continue after the pandemic has subsided. “The risk in my view is whether that demand wanes in a more normal economy, and whether they’re left with an oversupply situation,” said Langbaum.