Lessons from the Pros

Real Estate

Housing Starts Are Up and SFRs Are Being Built

According to the U.S. Department of Housing and Urban Development, Housing Starts in July of 2015 are up over ten percent from July 2014. Single family homes are expected to hit a total of 782,000 units this year. Before the housing crash (from the mid 1990’s) there wasn’t a year with fewer than a million new single family homes built. The increase in Housing Starts is a very positive sign that housing is moving in the right direction, but we are not back at pre-recession levels.

Diane Hill talks about positive Housing StartsThe surprising thing is that many of the single family homes being built are intentionally rental housing.  Lennar (larger home builder in Northern Nevada) just opened a community of 80 new homes in Sparks, NV that are rental homes.  The homes range from $1,499 a month for a 1,210 sq. ft. home to $1,999 for a 2,182 sq. ft. home.  According to Lennar, “Customers are now able to benefit from Lennar’s superior homes and experience a convenient rental lifestyle.”  This is an interesting shift. Although a small fraction of all homes are built as rentals, the number has grown quickly from almost zero to become a developing new sector of the market.

The current number of households that are looking to rent single-family homes is about one of ten.  That translates to 12.7 million of the total 120 million households in the US, according to John Burns (Real Estate consultant out of Irvine, CA).  Burns also forecast that new master-planned communities of detached single family homes for rentals will likely start to develop.

In a new report, A New Opportunity to Build Detached Homes to Rent, from John Burns, he states that, “Last year, approximately 25,000 detached homes were built for rent.  We believe that number will increase significantly over the next several years.”

Starwood Waypoint is a publicly traded REIT based out of Oakland, California that acquires, renovates, leases, maintains and manages single family rental homes.  They have properties in Northern California, Southern California, Phoenix, Denver, Dallas, Houston, Chicago, Atlanta and both Central and South Florida.  Their mission is to reinvent the home and rental experience by providing quality homes.  Starwood has worked with 12 builders to buy new homes.  They started by buying the slowest-selling floor plans or the last few homes in a community but now “actively” pursue new subdivisions in the markets they are currently in.

free real estate investing workshopThis is a very exciting opportunity for not only the small investor but also for the investors who are looking for new opportunities in REITS.  Starwood Waypoint, for example, says, “Our principal objective is to generate attractive risk-adjusted returns for our stockholders over the long-term through rental revenue growth, capital appreciation and dividend growth.”

Economists at Freddie Mac state that, “home sales are on track for the best year since 2007…. We expect the economy to post a stronger second half, especially in the housing sector.”

So there is stronger growth in both homes for purchase and homes for rent.  As an investor, whether you are purchasing for resale or for rental, timing is excellent for both.

Diana D. Hill


DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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