SFRs attract the attention of bond investors
The US real estate market continued its wild momentum despite the COVID-19 pandemic and associated closures, with CoreLogic’s national home price index increasing 9.2% year on year. And according to a new study from Pretium, the SFR market will continue to thrive for the foreseeable future, with mortgage lending becoming an attractive and viable bond strategy for investors.
SFR and mortgage credit have always been attractive yield alternatives, notes the Pretium report, especially since they are less crowded than competitors. But analysts say 2021 will be a banner year for asset classes – in particular “in a bond environment where low key rates, quantitative easing and now “Corporate QE” have extracted a large part of the available returns from liquid securities. “
the The SFR market has been the darling of investors throughout the pandemicand rents within the segment have been consistently increasing year over year. Single-family rents increased 3.8% year-over-year in January 2021, up from the 2.9% rate recorded for January 2020, according to the CoreLogic Single-Family Rents Index, and are trending to follow a recovery as the pandemic continues, offering good opportunities to investors.
“Developers and builders of single-family homes [rentals] can get top notch prizes ”, Tom MacManus, President, MONEY360 said during a roundtable discussion during GlobeSt. Apartments Spring 2021 Virtual Conference. And Trevor Koskovich, president of investment sales at NorthMarq, said in the same panel that he believes demand from the two largest demographic groups – baby boomers and millennials will drive growth. He said many millennials were so deeply in debt with students that it might be difficult for them to buy a home. “Millennials who have dogs and are starting to expand their families for the first time are going to hire them,” he said.
Pretium also claims that SFR’s market is poised to consolidate, thanks in large part to new technologies that have broadened the base for institutional ownership. And if that were to happen, SFR will have a stronger capacity to absorb new institutional capital flows without harming returns.
Likewise, the report notes, the mortgage credit side of residential housing markets offers good exposure to fixed income securities and is expected to benefit from the increasingly warm US housing market, which Pretium believes will continue to rise in 2021. : “In particular, while mortgage loan abstention policies have pushed serious delinquencies to incredibly high levels,” the report says, “homeowners are rich in equity and their debt service ratio is high. lowest in 40 years.–a social dividend on the re-regulation and conservative lending policies of the past decade. So, unlike the devastating experience of the global financial crisis, most of these seriously delinquent mortgages have great potential to lead to favorable economic outcomes for both homeowners and investors. “