Single-family landlords are getting undercut by a wave of “accidental landlords,” frustrated home sellers who can’t move properties and are instead renting them out, adding supply to markets where institutional players are already heavily concentrated.
Roughly 2.3 percent of homes listed for sale this summer were converted to rentals, with the rate topping 5 percent in select Sun Belt metros, the Wall Street Journal reported. Now, rents on new leases are slipping in places such as Dallas, Tampa, Orlando and Jacksonville, among the most oversupplied housing markets in the country.
Meanwhile, single-family landlord giants like Invitation Homes and American Homes 4 Rent, who previously bet that stretched affordability would keep young families renting, are also feeling the heat.
Nationally, more than 3 million homes were put up for sale at the start of summer, but only 28 percent found buyers, leaving nearly 2 million unsold, according to housing analytics firm Parcl Labs. That’s a fifth higher than the same time last year.
With sellers either slashing prices, delisting or defaulting to renting, the spillover is hitting single-family rental operators.
Invitation, which owns about 80,000 homes, reported rent declines for new tenants in several Florida and Texas cities. To offset the slide, it and rival AMH are raising rents for existing tenants; Invitation raised rates for existing tenants by 6.2 percent in South Florida this year, even as new renters got a slight discount.
That tactic props up revenue for now, but it risks widening the gap between in-place and market rents, potentially spurring turnover.
Investors who piled into the single-family rental trade during the pandemic are also feeling the squeeze. Shares of big landlords have lagged behind the S&P 500, homebuilders and apartment real estate investment trusts.
Ironically, a break in mortgage rates could ease the glut of unsold homes now leaking into rentals, but it would also lure more renters into homeownership, raising vacancy risk.
— Holden Walter-Warner
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