Green Street



Wall Street Journal: Millennial Home Buyers Send a Chill Through Rental Markets

According to The Wall Street Journal:

Rising homeownership is adding to the jitters in the residential rental market, which has slumped recently after a long stretch near the top of the commercial real-estate industry.

For most of the current economic expansion, declining ownership rates have enabled landlords of apartments and single-family homes to raise rents far faster than the pace of inflation. Demand has been fueled by the millions of people who haven’t had the money, credit or desire to pursue the traditional American dream.


One early warning sign came last week, when American Homes 4 Rent, which owns more than 50,000 single-family properties across 22 states, reported disappointing revenue growth for the third quarter. Analysts will be closely watching earnings from two other big companies with similar portfolios. Invitation Homes Inc. and Starwood Waypoint Homes, which agreed in August to merge, will both report results on Wednesday.

“Up to now, there really hasn’t been a chink in the armor of rent growth,” said John Pawlowski, an analyst with Green Street Advisors.

Many analysts predict that any pain that rising homeownership causes to the rental sector will be felt by these companies first, before renters of luxury apartments in big cities, for two reasons. First, house-for-rent companies tend to own properties in more affordable, nonurban markets. Second, people living in such homes have already opted for the single-family home lifestyle and so are more likely to become a homeowner.

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