As home prices continue climbing and mortgage rates start rising, many prospective homebuyers are opting out of the house hunt.
Unable to compete with investors — who often offer more than asking price for a house in cash — traditional homebuyers are looking for single-family homes to rent.
Developers recognize that interest and the number of single-family home communities exclusively for renters is growing in the Tucson area and around the country.
Las Vegas developer Randy Bury, president of Moderne Communities, has a rental community of 225 homes under construction at Rocking K Ranch, off of Old Spanish Trail.
American Homes 4 Rent recently bought 155 acres on Linda Vista Boulevard, near Twin Peaks Road, for a 441 single-family rental community next to Tucson Premium Outlets.
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It would be the biggest such project in Pima County to date, with others having between 200 and 300 homes.
As of Dec. 31, American Homes 4 Rent owned 57,024 single-family properties in 22 states.
“We are seeing several different rental products and new concepts which is exciting,” said local land broker Will White, with Land Advisors Organization. “The rental product is all brand new and offers a nice segmentation in the large projects.
“The demand for land to build these projects is at an all-time high.”
Known as build-for-rent developments (BFR), the trend was born out of the housing crash when investors bought a bunch of foreclosed homes and turned them into rentals.
But being a renter in an established neighborhood had its drawbacks and renters expressed interest in having neighbors like them, Bury said.
The majority of these BFR communities have been built in the last five years and are forecast to grow substantially.
More than 10% of raw land purchased in the Southwest in the past two years has been by BFR developers.
“The build-for-rent share of land purchased has grown over the course of the last couple years, as a flood of capital and rising single-family rents drive demand for development sites,” said Danielle Nguyen, senior research manager with John Burns Real Estate Consulting. “Given the need for additional space and the increase in working from home, build-for-rent homes give consumers the ability to live in a newly built home (and the) flexibility to move.”
The average rent for a single-family home in the Tucson market is $1,847 — an increase of 11.6% from 2021, according to real estate research group CoreLogic.
Meanwhile, the average new-home price for sale is now $456,690 and the average resale price is $381,808.
On top of that, the average rate on a 30-year fixed mortgage hit 5.11% last week — up more than 2 percentage points from a year ago and the highest rate in more than a decade.
“There is rapidly growing speculation relative to what may take place in the Tucson market as well as housing in general with a combination of developments on the global level, the continuing strength in the regional economy, the continuing spread of housing activity south from Phoenix toward Tucson, the significant jump in mortgage interest rates of the last few days, and the concerns over the impact of rising housing prices, as well as the anticipated growth in the Tucson market of single-family rental properties,” said housing analyst Jim Daniel, with R.L. Brown Reports.
He said new home starts may level off because of rising costs of materials and supply-chain backlogs, preventing a drop in prices.
“As we see it,” Daniel said, “it does not appear reasonable to assume that we will see relief from higher housing prices in this region.”
Contact reporter Gabriela Rico at [email protected]