🏘 🐂 Data from Insider shows SFR institutional managers are increasingly selling homes to regular homeowners through the MLS as a more effective channel to unlock value versus portfolio sales which trade at big discounts. The companies — Invitation Homes and AMH — have already sold 1003 homes this year, through July, to non-corporate buyers, according to Insider's analysis of data from real estate tracker ATTOM Data.

✅ That's more than these companies sold to mom-and-pop buyers for all of 2022 (760), and 2021 (498).

🔑 Operational prices have increased substantially in some markets, due to rising property taxes and insurance costs. The lack of housing supply, which has kept prices high even as mortgage rates rise, makes selling homes in markets that cost more to operate rentals a profitable play.

✅ 💡 "The market not having enough overall supply in the resale space has allowed us to, when we decided to sell homes, get really good what I would call kind of end-user sales prices," Dallas Tanner, Invitation Homes CEO said during a July earnings call.

🐂 🏘 Morgan Stanley housing strategist Jim Egan was one of the first to predict the housing marketing would prove "weirdly resilient" to higher rates in 2022

💡 👎2022: Last year, as the Federal Reserve ratcheted up interest rates to the highest level in decades, there were many who warned of a looming crash in home prices.

💡 👍 2023: Fast forward to today, and it’s clear that the US housing market has so far proven to be far more resilient than many of the bears expected.

Instead of a giant collapse in home prices as mortgage rates shot above 7%, residential real estate dipped only briefly and is now on its way up again.

Millennials, the generation born between 1981 and 1996, are falling behind other generations when it comes to wealth, hit by the 2008 economic crisis, stagnating wages, skyrocketing house prices during the pandemic, and now rising interest rates and inflation. For the first time, more than half of millennials own a home. The rest are finding it increasingly out of reach.

The millennial homeownership rate hit 51.5% in 2022, US Census data show. It’s been a slog to get there for the generation that came of age during the financial crisis — by age 30, 42% of millennials owned their homes compared to 48% of Gen X and more than half of baby boomers.

And those who are still renting are starting to think they’ll never get there.

Long-term housing trends remain strong. Looking back at historical price increases, COVID was a pull forward in pricing for coastal markets with a subsequent correction over the last year. Despite this, regional markets with strong fundamentals have held up well and are back to their long-term positive trends.

"While national home prices deflated a bit in the second half of 2022, the story varies significantly by market. You could even call it a bifurcated home price correction: Some regional markets have fallen sharply, while others have barely moved.

Among the 150 major housing markets tracked by Burns Home Value Index, 100 markets ended 2022 with local home prices below their 2022 peak. While 50 markets, including places like Milwaukee and Miami, ended 2022 with local home prices remaining at all-time highs.

Institutional real-estate investors have earmarked as much as $110 billion to purchase or build single-family-rental homes in the coming years, according to an estimate by Zelman & Associates, a real-estate-research and investment-banking firm. The sum is the largest ever amassed by investors to acquire American houses — enough to add almost 400,000 homes to the already expansive inventory of roughly 700,000 single-family properties now controlled by corporate landlords.

"It's the biggest mountain of capital we've ever seen to acquire homes," said Rick Palacios Jr., the director of research at John Burns Real Estate Consulting, a housing analysis and data firm that tracks SFR investment.

Millennials have always lagged behind other generations in homeownership. Despite the increase in ownership prior to and during COVID in 20019 and 2021, now higher prices, decreasing inventory and higher mortgage rates have shut out the next generation.

Millennials started their careers in the shadow of the Great Recession, when highly paid work was hard to find. Lower earnings, high student debts and reduced wealth have followed them ever since.

There is little respite in sight for those hoping to buy their first home. The housing market is cooling, but mortgage rates are expected to remain high as the Federal Reserve raises borrowing costs to combat inflation. And the high costs of rent, food and other necessities make it more difficult to save for a first-time down payment.

In­creas­ingly, U.S. con­sumers faced with in­fla­tion and the high price of homes are press­ing the pause but­ton on home buy­ing.

The rate on an av­er­age 30-year fixed mort­gage is now 6.61%, more than dou­ble what it was in Oc­to­ber 2021, ac­cord­ing to hous­ing-fi­nance agency Fred­die Mac. As a re­sult, sin­gle-fam­ily home rentals, or SFRs, are now a hot area in the real-es­tate mar­ket.

“We are in the midst of a hous­ing-af­ford­abil­ity cri­sis and peo­ple are suf­fer­ing from sticker shock,” says Gary Berman, CEO of Tri­con Res­i­den­tial, a ma­jor de­vel­oper, builder, and op­er­a­tor of sin­gle-fam­ily homes for rent across the U.S. and Canada.

Major Real Estate Revolutions

Real Estate 1.0 = Information Revolution
Real Estate 2.0 = Transaction Revolution
Real Estate 3.0 = Ownership Revolution

Real Estate 3.0 driven by lack of access and affordability in home ownership. Evolution of single family rental models moving to hybrid models led by the likes of Divvy, Landis, Pathway, Hawkhill who are leading the charge; and addressing a critical need for new innovative solutions for the next generation of millennial and gen z owners.

The demographic trends driving America’s housing market are impossible to ignore:

Our country is creating households faster than we’re building houses. Structural shortages in available homes for sale push housing prices higher, while young people are staying single for longer and increasingly concentrating in highly desirable urban centers.

These factors put enormous pressure on rents in the nation’s most dynamic cities, starkly revealing the troubling realities of both sides of the housing market’s two historical models.

At the same time, in the last two years, we have seen a shift in life priorities. Many people are voting with their feet and moving away from traditional economic hub cities to different cities, towns, or rural areas with no diminishment of economic opportunity.

The residential real estate world needs to address these changing dynamics. And yet virtually no aspect of the modern housing market is ready for these changes.

Most members of the Gen Z and millennial generations – U.S. adults between the ages of 18-25 and 26-41, respectively – do want to own a home someday, or even right now. Their biggest roadblock is affordability, respondents said in a March Bankrate survey conducted by research firm YouGov.

The findings: Nearly three-quarters (74%) of American adults still view homeownership as a top hallmark of achieving the so-called American Dream, beating out the ability to retire (66%), a successful career (60%) and having children (40%). Only 35% of respondents named obtaining a college degree as a key sign of economic success.

Specifically among millennials, 65% identified homeownership as a top sign of success. That number fell to 59% for Gen Zers — still a large figure, and neck-and-neck with that generation’s top choice of having a successful career (60%).

National Association of Realtors senior economist Nadia Evangelou estimates that 1.9 million first-time home buyers will be shut out of the market this year.

A historic run-up in home prices, a recent surge in mortgage rates, and a stubbornly low inventory of available homes are pushing this slice of the American dream out of the grasp of an increasing number of buyers, with more likely to join in the coming months.

The challenges facing home hunters without cash reserves, such as younger buyers and historically disadvantaged groups of people, are particularly daunting.

That choice has economic implications that go beyond where to live.

“It’s likely that these issues around wealth and home equity disparities are going to be exacerbated as more folks are locked out of homeownership,” says Raheem Hanifa, a research analyst at Harvard’s Joint Center for Housing Studies.