Faced with weak demand from homebuyers, homebuilders and sellers are turning to the rental market. And that’s probably good news for renters.
Home sellers face a tough market. According to the 30-year interest rate he has exceeded 6%. Tuesday Mortgage News Dailyexacerbated by recession fears, alienating buyers.
Put off by the soft market, some sellers in the South and West are putting their homes on the rental market instead. Rick Palacios Jr., Research Director at John Burns Real Estate Consulting, tweeted:
Palacios Jr. said sellers are shifting from selling to renting because California’s housing market is cooling faster than other regions.
“Home prices have been falling in major California markets for months, and sellers are aware of it, so they may be inclined to switch,” he told MarketWatch.
Some of these homeowners were hoping to flip their homes, but the cooling market is holding back, he noted.
“We know that investor deals as a percentage of total home sales in Los Angeles, Orange County, San Diego, Sacramento, San Jose, and San Francisco are all around 20% to 30%,” Palacios Jr. said. I’m here.
““There are a lot of builders out there who believe they can provide a hedge to the slowing housing market.”“
A similar trend is observed among home builders.
“Many builders believe the rental market will provide a hedge to the slowing housing market,” Zonda chief economist Ari Wolfe told MarketWatch.
“Builders who were less active in rental space a few years ago are now building single-family rental homes,” she added. , and in some cases school districts, offering consumers all without worrying about a down payment. ”
Wolf said he’s seeing a pivot in places like Phoenix, Arizona, where land prices are slightly lower and demand is still strong, like parts of the South and Midwest.
their Earlier this month, in its third-quarter earnings release, Homebuilder Hovnanian Enterprises has announced a pivot plan.
Ara Hovnanian, Chairman, President and CEO of Hovnanian Enterprises HOV, said:
““Last quarter, we began construction of our first 200 construction rental housing communities, which have been pre-sold at solid margins.”“
He added that they intend to pursue two other projects that will build 350 more rental homes.
Hobnanian said: interest. “
“We are very excited about the opportunities in the growing sector.”
In their view, construction rental housing is easier to build. It’s also easy to switch “back and forth,” the company added.
Ultimately, the shift to rentals may ease the pressure on renters who have had to contend with a tough market in recent months.
Rents are slowing, Apartment List said in it September rent report, due to a “slight increase” in vacancies. That could increase as more builders enter the construction rental market.
Thinking about the housing market? Write to MarketWatch reporter Aarthi Swaminathan ([email protected]).