MReport March 2020

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14 | M R EP O RT FEATURE A new decade inevitably brings new trends, chal- lenges, and obstacles for the residential invest- ment community to overcome. For this month's edition, MReport spoke to subject-matters from Auction. com, Carrington Mortgage Services, Pintar Investment Company, PropertyWare, and more about the issues facing the residential investment community. Read on for insights into the increased prominence of single-family rental spurred by ongoing affordability challenges, the rise of build-for- rent, the potential of HUD's Opportunity Zones, and more. Affordability Isn't What It Used to Be T he affordability crisis that has a stranglehold on most of the nation shows no signs of relinquishing its grip. The National Association of Realtors said in January that home prices rose 3.4% to $299,995. Prices in 18 metros rose by more than 10% year-over-year. Rising home prices are caus- ing the popularity of single- family rentals to soar for many Americans. The Census Bureau reported that 11,000 single-fam- ily built-for-rent starts occurred during Q 4 2019. Josh Hartman, CEO of NexMetro Communities, said in an interview with NPR in late 2019, "What we were shocked to find out was it was people that had great credit, they had money for down payments, they had great incomes but they just didn't want to own a home. They were a lifestyle renter, renter by choice." Jeff Pintar, CEO and Founder of Pintar Investment Company told MReport that it is not just the millennials or Gen Z buyers—the prospective homeowners hit hardest by financial constraints— who are turning to the rental market. Rather, these changes are impacting all sectors of possible homebuyers. He added that there is a trend toward wanting to live in a single-family home, where owners can have a garage and a yard, as opposed to sharing walls and a parking structure. This is driving more Americans who chose to rent toward the single-family side of the market, and away from multifamily options such as apart- ment homes. Waking Up From the American Dream "I t's just not the same quality of life as you get living in a single-family home. For the people that are renting, there's a prefer- ence to live in a single-family home than there is an apartment complex, and as the investors have become more professional and reliable, that that is just con- tinuing to grow," Pintar said. Inaas Arabi, VP, General Manager, PropertyWare, a RealPage company, said younger generations are more mobile and are more likely to move than prior generations. He added younger generations want "flex- ibility" when it comes to their housing options, as renters are able to cancel a lease or quickly move to a new location. "I believe this is because they still want the home ownership experience, but they certainly do not want the financial burden of that experience, so they still want the single-family home," Arabi said. "They still want the yard, they still want the maybe better schools, they still want to be part of an HOA or a community or a subdivision, but they don't want to take on mortgages or loans or financial burden for that." Data from Redfin supports Arabi's claim, as 26% of people who are looking to buy a home are planning to move. The areas hit hardest by this trend are expensive metros, such as San Francisco and New York. Arabi added that the National Association of Realtors found people move every 5.3 years, which he said should go down "considerably" considering recent trends from millennial and Gen Z buyers. Zillow reported in 2019 that the number of people between the ages of 25-and-34-years-old that have lived in their home for less than two years rose to 45.3% in 2017 from 33.8% in 1960. "If you work out the financial aspect of it, there's probably not a lot of equity that you're going to be able to build within those two years that will cover the costs for the selling and the cost for buying," Arabi said. "Ultimately, financially, if you're making that move, you probably will be in the losing state versus the profiting state. And if that's the case, you probably would choose to rent versus buy at this point." The End Zone of Opportunity R ising home prices in the single- family space are also leading investors to investigate the poten- tial of HUD's Opportunity Zones. Opportunity Zones offer the opportunity to achieve homeown- ership, with the intention that prices remain low to help drive economic growth. The Tax Cuts and Jobs Act created new tax incentives for in- vestments in Opportunity Zones. These cuts were used in an effort By Mike Albanese How are single-family residential investors adapting to the opportunities presented by affordability challenges and many Americans' shift to rental? MReport speaks to the experts Investing in the Future

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