The Stessa Weekly Newsletter is hand-curated every week to bring you insightful accounts of new features, investing tips, business insights, and market trends from the real estate ecosystem. This week, we will cover real estate investor resolutions, how all predictions point to a cooler 2019, and a new Freddie Mac rental unit study that may surprise you.
Happy New Year from the Stessa team…and resolutions!
As we tuned in to watch the ball drop in Times Square with a trusty bottle of bubbly chilling by our sides, we couldn’t help but start thinking about our resolutions. Now is the perfect time of year to make new goals for our real estate businesses in 2019.
A big happy new year from the entire Stessa team, and here’s to a productive and successful 2019!
The vanishing homebuyer could mean more stock for investors
The real estate predictions for 2019 are pouring in, and we covered many of them last week. The most common prediction, however, is worth a deeper dive this week: a cooling housing market.
Laura Kusisto of The Wall Street Journal wrote last week about how the housing market is poised to cool into 2019, noting that “The recent decline in home sales reflects a lack of inventory and the rising cost of homes, which has priced many buyers out of the more desirable markets.” And, as interest rates rise, this reality is further compounded.
Indeed, Mansion Buyer writer Beckie Strum has dubbed 2019 “The Year of the Vanishing Home Buyer.”
Wolf Richter reporting on Seeking Alpha notes that “The reasons for the housing market downturn are in the eye of the beholder. But whatever the reasons for it may be, the data on the housing market is getting uglier by the month.” To illustrate, Richter points to pending home sales:
Source: Seeking Alpha
For real estate investors keeping an eye on their local markets, this could mean a few things. For one, fewer buyers means better negotiation leverage and less competition as we look to increase our portfolios in 2019. Second, as BTIG REIT Analyst James Sullivan notes, a cooling market heading into 2019 also means higher rent growth in most major urban centers.
Single-family homes largest rental market in U.S.
In an impressive new study, Freddie Mac Multifamily gives real estate investors an important lens into the national rental market. Their new report notes that despite most believing that rental housing is primarily apartment style, which does account for 18 million renter households, an overwhelming majority of “the other 25 million renter households are in single-family rental (SFR) homes.”
Source: Freddie Mac
Indeed, according to the report, the SFR market makes up about half of the overall rental market and is the single largest segment of the rental market by valuation and households served. Other key findings from the study worth noting include:
- Small investors dominate the SFR space. The overwhelming majority of SFRs are owned and operated by individuals or very small investors.
- Large-scale institutional investors are a new entry into the SFR market, but are limited to a select few firms that own approximately 1 percent of SFRs.
- Secondary market opportunities for SFR loans are limited. Apart from these select few institutional investors with access to the capital markets, there are limited secondary market opportunities for SFR loans with middle-tier investors that would provide liquidity and stability.