Blog Insights

This week, analysts at LendingOne set out to find the pockets of the country where population is rising and falling over the past year. Population fluctuations significantly influence local housing markets by directly affecting housing demand. Sustained population growth, helps to maintain long-term upward pressure on home prices and rents.    LendingOne’s top-line findings:  60% of U.S. counties gained population in 2023 The most significant population gains were once again observed in the U.S. Southeast, Mountain West, and Texas. The most significant population declines were in pockets of the Midwest, Northeast, and California.   For the analysis, LendingOne sourced data from the U.S. Census Bureau. Let’s take a closer look at the year-over-year change between 2022 and 2023.     The map above illustrates the ongoing rapid population growth in Sun Belt markets such as Florida and east/central Texas. These regions benefit from favorable climates, economic opportunities, and appealing lifestyle amenities, attracting both domestic migrants and international immigrants. Compared to cities like Seattle and New York City, Sun Belt counties like Harris County, Texas (Houston) and Hillsborough County, Florida (Tampa) are perceived as more affordable. Additionally, Tennessee, Texas, and Florida receive an extra boost due to their lack of state income tax.     Population dips in certain parts of the Northeast and Midwest can be attributed to aging demographics and the outmigration of younger residents. While the population decline in high-cost West Coast markets like Los Angeles County boils down to a lack of housing affordability.     While sustained population growth can hint at long-term upward pressure on rents and prices, don’t be fooled into thinking that falling population means prices and rents have to fall in the short-term. Often they don’t. In fact, most of the places with falling population right now are still seeing slight increases in single-family rents and home prices   What’s the big picture story? The Sun Belt’s sustained population growth underscores its status as the economic engine for expansion in the country, attracting both residents and businesses. That’s why it continues to be at the epicenter of housing sector investments, like build-to-rent.

Analysts at LendingOne looked over the latest inventory data to better understand what could await real estate investors over the coming year. LendingOne’s top-line findings:  The number of homes for sale is rising in most of the country on a year-over-year basis. Investors out shopping are seeing more leverage, in most markets, now than two years ago. Inventory for sale on a national level is still limited, which explains why spiked mortgage rates haven’t created more price declines thus far.  Active listings remain tightest across markets in the Northeast and Midwest, while there’s greater softening happening in parts of the Southwest, including many Texas markets, and the Southeast, including many Florida markets. In June 2024, there were 839,992 national active listings on Realtor.com, showing a 46% increase from June 2022 levels (573,650 listings) and a 37% increase from June 2023 (614,326 listings).     The 5 states that have seen the biggest increase in active inventory for sale over the past 12 months: Florida: +71%  Vermont: +62%  Arizona: +54%  Georgia: +53%  Hawaii: +50%   However, national active listings in June 2024 (839,992 listings) were still -31% lower than the pre-pandemic levels of June 2019 (1,219,807 listings). That lack of active listings is a core reason that strained affordability and spiked mortgage rates haven’t translated into a greater pullback in national home prices.   The 5 states where inventory is still most below pre-pandemic levels: Connecticut: -76%  New Jersey: -69%  Illinois: -67%  Vermont: -67%  Rhode Island: -64% Just these 3 states have seen inventory climb above pre-pandemic levels:  Texas: +5% Idaho: +4%  Florida: +0.4%

This week, analysts at LendingOne set out to find the top single-family rental markets where, despite spiked mortgage rates and spiked home prices, investors can still find cash-flowing properties. LendingOne’s top-line findings:  A lack of inventory presents a double-edged sword for investors. On one hand, it helps to maintain the value of investors’ current portfolios; on the other hand, it makes it more challenging to find cash-flowing properties. Many of the best cash-flowing opportunities right now are in lower-cost Midwest and Northeast markets. Single-family rental investors are finding fewer cash-flowing opportunities in high-cost coastal markets like San Francisco, as well as pandemic boomtowns like Salt Lake City and Austin. For the analysis, we sourced data from ATTOM Data, which encompasses regional median rents and median home prices in the nation’s largest counties. A gross rental yield was calculated by dividing the annualized gross rent income by the median purchase price.   Among the 50 largest U.S. counties, these 5 have the highest annual gross yields: Wayne County, Michigan: 12.0% Allegheny County, Pennsylvania: 11.2% Cuyahoga County, Ohio: 10.2% Cook County, Illinois: 10.1% Riverside County, California: 9.7%   Among the 50 largest U.S. counties, these 5 have the lowest annual gross yields: Santa Clara County, California: 3.0% Honolulu County, Hawaii: 4.1% Fairfax County, Virginia: 4.2% Kings County, New York: 4.4% Alameda County, California: 4.4%     What’s the big picture story?  Spiked mortgage rates, which came right after a period of historic home price growth, have made it increasingly difficult for investors to uncover new cash-flowing single-family properties. LendingOne finds this challenge is particularly pronounced in high-cost markets like D.C., Salt Lake City, and San Francisco. Instead, investors are discovering better success in affordable pockets of the Midwest and Northeast, regions they had previously overlooked. In places like Cleveland and Pittsburgh, home prices haven’t stretched as far beyond local incomes and rents.

This week, LendingOne analysts looked at single-family rent data to better understand what investors are seeing across the nation right now.  LendingOne’s top-line findings:  Single-family home rents continue to grow nationally year-over-year, albeit much slower than they did during the Pandemic Housing Boom. U.S. single-family rents rose 4.7% from May 2023 to May 2024.  More affordable metros in the Midwest and Northeast are seeing the fastest single-family rent growth, indicating opportunities for increased cash flow for investors in these markets. Southwest Florida markets, which experienced some of the highest rent increases during the Pandemic Housing Boom, are now softening. For this analysis, LendingOne used Zillow Observed Rent Index (ZORI) data and calculated 12-month interval rent shifts for 240 metropolitan areas.  The table below shows the single-family rent shifts in just the 50 largest markets.     LendingOne analysts found that among the 240 metros that had ZORI data for May every year from 2019 to 2024: These 5 metros saw the biggest single-family rent growth from May 2023 to May 2024: Atlantic City, New Jersey: +21.2% Flint, Michigan: +13% Burlington, North Carolina: +11.7% Peoria, Illinois: +11.3% Roanoke, Virginia: +10.5% These 5 metros saw the biggest single-family rent decline from May 2023 to May 2024: Lake Charles, Louisiana: −3.8% Punta Gorda, Florida: −2.0% Cape Coral, Florida: −0.9% Austin, Texas: −0.5% Crestview, Florida: −0.2%     The supply of single-family rentals in the Sun Belt has increased significantly in recent years. As this new supply, particularly build-to-rent construction in markets like Phoenix, Dallas, Orlando, and Atlanta, comes online, rent growth has softened.  Meanwhile, in Midwestern and Northeast markets like St. Louis, Cleveland, Cincinnati, Buffalo, and Milwaukee, where there is less new rental supply coming online, rent growth has not decelerated as much. The biggest outliers right now are the Southwest Florida metros, particularly markets like Punta Gorda and Cape Coral, where they are seeing small outright year-over-year single-family rent declines. These markets have experienced a slowdown in migration following Hurricane Ian in September 2022.  Big Picture: While national single-family rent growth has decelerated significantly since the Pandemic Housing Boom, it is still rising year-over-year in most housing markets.

LendingOne analyzed monthly housing permit data from the U.S. Census Bureau’s Building Permit Survey to see where single-family permit activity is ramping up, and where it is pulling back. These are our key findings: U.S. single-family housing permit activity remains resilient, with permits in April 2024 being above 23% April 2023 levels, and 22% above April 2019. Markets in the South saw the most single-family permits in April 2024. Wilmington, North Carolina saw a 226% year-over-year growth in single-family permit activity—the highest of any U.S. metro.     The chart above shows that in the face of strained housing affordability, new home construction has remained resilient. But it does vary by market.   Among the housing markets that issued at least 400 single-family housing permits in April 2024: The 5 markets that saw the most year-over-year permit activity growth were:   Wilmington, NC: +226% Chattanooga, TN-GA: +124% Provo, UT: +77% Cape Coral, FL: +71% Ocala, FL: +67% The 5 markets that saw the least year-over-year permit activity growth were: Myrtle Beach, SC: -24% Orlando, FL: -3% Nashville, TN: +0% Philadelphia, PA: +7% Charlotte, NC: +8%       Houston and Dallas issued the most permits to build single-family homes overall, followed by Phoenix, Atlanta, and Charlotte. Single-family housing permit activity remains the highest in Texas markets despite rising resale inventory and some price corrections.  Even in Austin, where home prices have fallen 18.7% from their 2022 peak according to Zillow, single-family housing permit activity is up 22% year-over-year. Permits for single-family structures in Florida are also on the rise despite home value depreciation in some markets. North Port, Cape Coral, Port St. Lucie, and Jacksonville all saw mild year-over-year price declines in April but are also among the U.S. housing markets ramping up single-family development.     Big Picture: Despite mortgage rates still sitting around 7%, single-family homebuilding has proved resilient so far. We’ll keep an eye on it.

U.S. home prices are up 494% over the past 40 years, according to the Freddie Mac House Price Index. And some metropolitan areas have seen price growth nearly twice as big in that time.  To see where single-family home prices have increased the most since 1984, LendingOne analyzed Freddie Mac’s historical data for 385 U.S. metropolitan areas.  LendingOne’s key findings: Many of the biggest home price gains since 1984 are in coastal markets.  The Pacific Northwest, in particular, ranks high for 40-year appreciation.  Home prices in Bend, Oregon are up almost 1000% over the past 40 years. The 5 metropolitan areas with the biggest home price gains between March 1984 and March 2024, according to LendingOne’s analysis: Bend, OR: +987% Seattle-Tacoma-Bellevue, WA: +936% San Jose-Sunnyvale-Santa Clara, CA: +933% Bellingham, WA: +891% Ocean City, NJ: +874%     It’s important to note that inflation and wage growth alone did not spur all the growth in national home prices over the past four decades. Since 1984, consumer price inflation has risen 203%, meanwhile, median U.S. household incomes have risen 233%. That is well below the 494% jump in national home prices during the same span.

Analysts at LendingOne looked over the latest inventory data to better understand what could await real estate investors over the coming year. LendingOne’s top-line findings:  Inventory for sale on a national level is still limited, which sets a floor on prices and keeps existing investor portfolios at high levels.  In early 2024, active listings levels are rising faster than in previous years, indicating that there are more opportunities out there for savvy investors.  Active listings remain tightest across markets in the Northeast and Midwest markets, while there’s greater softening happening in parts of Texas and Florida. In May 2024, there were 787,722 active listings on Realtor.com, showing a 64% increase from May 2022 levels (479,462 listings) and up 35% from May 2023 582,441 listings). However, active listings in May 2024 were still 33% lower than the pre-pandemic levels of May 2019 (1,180,920 listings). That lack of active listings is a core reason that strained affordability and spiked mortgage rates haven’t translated into a greater pullback in home prices.     While active listings on a national basis remain well below pre-pandemic levels, some pockets of the country, including San Antonio and Austin, have bounced back above pre-pandemic inventory levels. Among the 100 largest metros 5 metros where active listings in May 2024 were up the most since May 2019: Lakeland, FL: +43% Austin-Round, TX: +35% Colorado Springs, CO: +30% San Antonio, TX: +20% McAllen, TX: +17% 5 metros where active listings in May 2024 were down the most since May 2019: Hartford, CT: -79% Bridgeport, CT: -79% New Haven, CT: -73% Albany, NY: -71% Allentown, PA: -69% For now, at least, the markets that have returned to pre-pandemic levels remain in the minority.   How does LendingOne interpret active listing data? If inventory begins to rise quickly, in theory, it signals a softening market. If inventory begins to fall quickly, in theory, it signals a strengthening housing market.  U.S. housing markets where inventory has returned to pre-pandemic levels, like Austin, have experienced softer home price growth over the past two years. Conversely, housing markets where inventory remains far below pre-pandemic levels have, generally speaking, experienced stronger home price growth over the past two years. Big picture: While national inventory is still rising a bit as mortgage rates remain elevated, it still remains well below pre-pandemic levels. That suggests that in the short term, home prices in a lot of markets could hold firm or even go higher.  

While spiked mortgage rates haven’t deterred housing investors from the market, there has been a notable shift in the locations they are targeting.  Analysts at LendingOne embarked on a study to identify which housing markets investors are flocking to and which ones they are pulling back from.    LendingOne’s key findings: Investors are retreating from high-cost, slower population growth housing markets such as San Francisco, San Jose, San Diego, and Los Angeles.  Investors are now turning their attention to markets characterized by affordability, such as Pittsburgh and Louisville, or those with promising long-term population and rent growth, such as Denver and Charlotte.  The exurb areas surrounding New York City, which are benefiting from the stickiness of hybrid work, continue to attract significant investor interest. To conduct our analysis, LendingOne utilized Parcl Labs’ “Investor Purchase to Sale Ratio,” which is designed to calculate where investors are collectively purchasing more single-family homes than they are selling, and vice versa.     The reason single-family investors are pulling back from markets like San Francisco and San Diego boils down to cash flow: While spiked mortgage rates have made it challenging to find cash-flowing properties across much of the country, it’s even more pronounced in high-cost markets where finding cash-flowing properties was already difficult before rates increased. The primary way to make markets like San Diego attractive again would either be a pullback in mortgage rates or a substantial increase in rents.  On the flip side, markets like St. Louis and Indianapolis have kept investors’ attention given it’s easier in those markets to find single-family rentals that can still cash flow even at 6% and 7% mortgage rates.

Build-to-Rent (BTR) has emerged as a popular acquisition model in the single-family rental market. According to the article BTR is Proving It’s Built to Last, the lack of homes for sale combined with a growing demand for SFRs has captured the attention of investors in the institutional space looking for new potential investment opportunities. We delve into the article’s report with these top 5 key takeaways:  1. Addressing the Housing Supply Crisis:  The persistent lack of existing homes for sale, coupled with the growing demand for single-family rentals, has created an urgent need for housing supply. The BTR model has emerged as a solution to this crisis, attracting attention from large institutional investors who recognize its potential in creating much-needed housing supply and providing high-quality living options for families. 2. Market Dynamics and Demand:  Economic factors, including surging mortgage rates and home prices, have shifted market dynamics in favor of renting over buying. This economic reality has driven increased demand for single-family rentals, particularly from millennials and the emerging Gen Z population. The desire for more space, flexibility, and lifestyle amenities has propelled the demand for BTR communities, leading to their rapid growth and expansion. 3. Builders’ Response to Market Trends:  Homebuilders have responded to the changing market landscape by shifting their projects toward BTR communities. The increase in BTR construction starts and completions reflects builders’ efforts to meet the surging demand for single-family rentals. Luxury single-family rental communities with amenities like pools, fitness centers, and playgrounds have become particularly attractive to modern millennial families. 4. Institutional Investor Interest:  The scarcity of resale supply has bolstered the demand for new homes, attracting the attention of institutional investors to the BTR market. Large institutional players have entered the BTR sector through acquisitions and joint ventures, indicating confidence in its long-term potential and strong returns. 5. Outlook for Future Growth: Multiple trends, including the persistent housing shortage, sustained demand for rentals, and continued investment inflow into the BTR market, point towards long-term growth and stability. BTRs offer investors a differentiated product with strong operating features and potential exit optionality, making them an attractive asset class in the real estate market. The rise of BTR as a dominant acquisition model in the SFR sector presents investors with compelling opportunities to address the housing supply crisis, capitalize on shifting market dynamics, and achieve strong returns in the long term.