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What Can Investors in Single-Family Homes Expect for the Second Half of 2016?


Is there a strong case for investing in single-family (SFH) rental housing? We think so, and many leading economists agree.

Here are five factors why the SFH market continues to be a strong investor’s domain:

1. Demand for Rental Homes May Continue to Move Up

Continued high demand has helped keep rents up in 2016. According to CoreLogic, a data and analysis firm for real estate investors, more than 1.25 million new households will be formed during 2016.

These new households will likely increase demand for single-family rental market.

“Demand for rental units has been outstripping supply, and vacancy rates are now about as low as they have been in 30 years,” said Mark Zandi, chief economist at Moody’s Analytics.

“Demand for rental units has been outstripping supply, and vacancy rates are now about as low as they have been in 30 years, said Mr. Zandi.

“Fueling demand are the millennials,” said Zandi, “Millenials are finally finding jobs and striking out on their own, along with households that have lost their homes in foreclosure, and more empty-nesters looking to downsize and simplify.”

2. Rents May Continue to Increase

Alex Villacorta, chief economist of Clear Capital, a real estate data and analytics firm, concurred: “The two most important housing market trends to watch in 2016 will be the continued growth of rental rates and the moderating trend in home prices. More households will likely choose to rent over buy in 2016.”

“Builders are ramping up construction of apartments,” said Mr. Zandi. “But in most places they still aren’t meeting the demand, especially for affordable rental units in urban centers. Rents will continue to rise strongly.”

3. Mortgage Rates May Gradually Increase

While still at historically low levels, mortgage rates for single-family homes may continue their slow but upward trajectory for the balance of 2016. The chief economist at Zillow.com, Svenja Gudell, has projected that the Federal Reserve may raise rates four times at 25 basis points each.

“Most forecasts place growth between 2.00% and 3 .00% during 2016, creating enough jobs to exert downward pressure on the national unemployment rate,” said Mr. Gudell.

Fannie Mae expects the 30-year fixed-rate mortgage to average below 4.50% for 2016.

4. Home Sales May Continue to Grow

“We are entering a normal, but healthy housing market,” said Jonathan Smoke, chief economist at Realtor.com. The real estate firm has projected a 16% increase in new construction homes for 2016 in the U.S, versus a 12% increase in 2015.

Nevertheless, higher mortgage rates and lower affordability may slow acceleration in new and existing home sales by 3.00% to 5.00% for the balance 2016, according to estimates by Freddie Mac.

5. Home Prices May Continue to Rise

The price of homes, whether owner-occupied or renter-occupied, may also continue to increase during the balance of 2016. Realtor.com has forecasted a 3.00% price appreciation in homes in the U.S. for 2016.

“Rental investors will particularly benefit as property appreciates, rents rise to record heights and vacancy rates fall,” said Anthony Cazazian, senior VP of national sales and business development at B2R Finance.

For more information about the potential benefits of investing in a portfolio of professionally managed single-family homes, please contact Harold Willig at harold.willig@springviewinvestments.com, or call 917-209-4452.

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