As Home Sales Slow, Single-Family Rental Demand Surges

As a growing number of buyers pull out of home purchases amid fast-rising mortgage rates and record high home prices, demand for single-family rentals is surging, John Burns Real Estate Consulting reports. In May, just 39% of home builders predicted strong sales in the next six months compared to 68% of optimistic builders in January.

On the flipside, 74% of single-family rental (SFR) operators surveyed in Q1 2022 reported “Strong” to “Very Strong” anticipated leasing in the next six months, and as affordability wanes for home sales, that expectation is coming to fruition.

When we asked home builders and agents for their sales outlook for the next six months, we observed moderating expectations. In May, just 39% of home builders expected Good sales in the next six months versus 68% Good ratings in January. Similarly, 46% of resale agents expected Good sales in May vs. 81% Good in January. These ratings of expectations will likely trend lower as mortgage rates climb higher, inflationary pressures resist quick fixes, and recessionary fears intensify.

In contrast, single-family rental (SFR) operators maintain much more optimism for leasing activity over the next six months. We expect housing demand will shift to renting as households seek relative affordability and flexibility.

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