As rental rates decline, owners should consider placing inventory back onto the market.
Real estate investors have enjoyed great success over the past three and five years. Rents have steadily increased while home prices have appreciated by an incredible 16.4% and 35.5% respectively over that timeframe; over five years, those figures jump to 24.9% and 50.8%, all occurring with low cost financing solutions available.
Now is the time for investors to sell. Home prices have already begun their declines in some markets–particularly those in the western US where median home prices have already fallen by an astounding 8 percent compared to one year ago.
There are 44 million renter households: half reside in midsized to large apartment buildings while the other half rent single-family, duplex, triplex, or quadplex units. Apartment rentals may not always be as competitively priced, but due to a 40-year high in multifamily construction projects, more units should become available on the market in coming months and throughout 2019. Rent growth has already transitioned from acceleration to deceleration, still rising across most markets at a more gradual pace. Single-family construction remains underproduced compared to historical averages, yet new home sales are back near pre-COVID levels. Home builders are making profits; stock prices for publicly listed construction companies have surged approximately 50% year over year, and inventories of newly built homes remain ample.
Existing home sales have not seen similar success. Inventory levels at 1 million have reached historic lows, which has hindered existing-home sales and led to multiple offers being placed on midpriced homes. We need 50% growth in listings to return us back to pre-pandemic 2019 levels; for adequate supply to emerge we would require 100%. Investors play an essential role here: the National Association of REALTORS(r) is calling for federal incentive for investors selling to first-time or first-generation buyers who help bring needed inventory onto the market – temporary capital gains relief is being considered.
