Is the Build-for-Rent Sector Prepared to Weather a Possible Recession?

The single-family build-to-rent (B2R) market has been heating up for the last several years as would-be homebuyers safeguarded their savings in a high-cost housing market and instead became renters. But as home sales slow and market experts warn of a possible recession in the next year, investors are beginning to ask more questions about new trends and potential risks in the B2R space.

Rent gains are expected to slow from recent 15% to 20% rates to single-digit growth for the next few years, but steady demand from high-income renters will keep prices relatively high compared with pre-pandemic rates. Also, as builders reduce housing prices and offer concessions and discounts to prospective buyers, some may not be so quick to take the bait, and instead, they may seek out B2R properties while they wait for prices to fall further in the housing market, Forbes reports.

When a builder is lowering prices each month, the buyers tend to put off the purchase, possibly staying in the rental market for another year or two, so that they can re-enter the purchase market after home prices have stabilized. The householder figures, “why buy now, when I can wait a year and get the same house for $50,000 less?” Newly-built homes in rental single-family communities allow them to do that without giving up the single-family lifestyle. In that sense, builder price cuts will likely feed demand for BFR developments

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