Real Estate News: Real Estate Investing Podcast

The Real Estate News Brief: Single-Family Rental Forecast, Build-to-Rent Demand in 2023, A New Expense for LA Landlords

02.15.2023 - By Kathy Fettke / RealWealthPlay

Download our free app to listen on your phone

Download on the App StoreGet it on Google Play

In this Real Estate News Brief for the week ending February 11th, 2023... What’s ahead for single-family rentals and build-to-rent homes, along with a look at why Los Angeles landlords may be fuming right now, over a new law.   Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.   Economic News   We begin with economic news from this past week, and comments from Fed Chief Jerome Powell, about last week’s surprisingly strong January jobs report. He said of the report: “It was certainly stronger than anyone I know expected.” (1) The blowout report surpassed expectations with 517,000 new jobs, and a decrease in the unemployment rate to 3.4%. (2)    With 5 million more jobs than there are workers to fill them, Powell is concerned that competition for workers will lead to continued inflationary wage growth. He says the “disinflationary” process has begun, and expects to see significant declines in inflation this year, but expects it will take more rate hikes, and all of next year to get inflation back to the 2% level, especially with such a strong job market. Powell says: “If we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more.”   On the positive side of the jobs report are comments from Federal Reserve Governor Lisa Cook who believes the Fed’s rate hikes “can be accomplished without a large increase in unemployment.” And that raises hope for a “soft landing.” (3)   There’s still talk that the federal funds rate will peak at 5% to 5.25%. We are currently in  the 4.5% to 4.75% range. New York Fed Chief John Williams is among those who see 5% as a peak short-term rate, although he reiterated during an interview with the Wall Street Journal that there is still much work to be done.   As for the weekly jobless report, initial claims were 13,000 higher than the week before, but they are still near pandemic lows. The total was 196,000. Continuing claims were up 38,000 to a total of 1.69 million. There has been a gradual increase in those continuing claims which may indicate that it’s taking longer for people to find new jobs. (4)   Mortgage Rates   Mortgage rates ticked up slightly. Freddie Mac says the average 30-year fixed-rate mortgage was 3 basis points higher at 6.12%. The 15-year was 11 points higher at 5.25%. (5)   In other news making headlines…   Single-Family Rentals Forecast   A new analysis by Green Street says that single-family rentals will be “well-positioned” for the next five years. GlobeSt.com reported on the analysis by John Pawlowski who says that single-family rentals will benefit from strong demographics, affordable price points, and limited single-family construction. Pawlowski also expects SFR communities to benefit from the 35 to 44-year old age group which is expected to grow at double the rate of other age groups.  He says that many of these communities are in the Southeast, either existing, planned, or under construction. (6)   The Green Street report also describes this asset class as “resilient” with a “firm floor” for rents and values. The fact that renting has become more affordable than owning contributes to this outlook. But he does warn about headwinds. He says expects higher operating costs to continue without much relief in sight. That includes costs for repairs, maintenance, and property taxes. There are also political risks ahead for this asset class, due to potential regulation that mainly targets institutional investors.   Strong Year for Build-to-Rent    New build-to-rent homes are also expected to do well this year. Brad Hunter of Hunter Housing Economics told GlobeSt.com that he expects to see another “up” year with somewhat slower leasing activity. But he sees this as a temporary lull with flat rent growth for the next few quarters. He says: “By this Fall, we’ll see rent growth come back again, and probably fairly strongly.” He’s predicting rent growth of 5 to 6% by 2025 or even sometime next year. (7)   A limited supply of new single-family homes will push demand higher for renters, especially among Millennials with growing families. He says the spotlight is on the Southeast with “continued strong demand and solid performance in BTR, even during 2023, but at an even greater level from 2024 to 2028.” And he says that “Florida is going to be one of the strongest markets… but Georgia and the Carolinas will also see a lot of strong performance.”   LA Landlords Hit with New Renter Protection Law   Los Angeles is adding another financial burden to the business of being a landlord. The city council approved a new law that would force landlords to pay relocation costs, if they hike rents more than 10%. Relocation costs would be three times the fair market rent, plus another $1,400 in moving expenses. (8)   This is just the final part of a tenant protections package that the council put together after Covid emergency measures expired. The new ordinance would apply to tenants in newer homes who are not already covered by existing rent control laws. There are 84,000 of those homes in L.A., all built after 2008.   That’s it for today. Check the show notes for links at newsforinvestors.com. Please remember to hit the join button to become a RealWealth member. It’s free to join, and free to access the data on our site. We just held an all-day virtual live event with property teams from markets across the country. We’ll be uploading videos to our website from that event for people who missed it. And don’t forget to subscribe to our podcast, and follow me on Instagram for market updates @kathyfettke.    Thanks for listening. I'm Kathy Fettke.   Links:   1 - https://www.marketwatch.com/story/powell-says-strong-jobs-report-shows-fed-needs-to-keep-raising-rates-but-he-expects-significant-declines-in-inflation-rate-in-2023-11675794928?mod=federal-reserve   2 - https://www.marketwatch.com/story/u-s-adds-517-000-new-jobs-in-january-in-sign-labor-market-still-strong-11675431419?mod=home-page   3 - https://www.reuters.com/markets/us/feds-cook-january-job-gains-increase-hopes-soft-landing-2023-02-08/   4 - https://www.marketwatch.com/story/jobless-claims-climb-13-000-to-196-000-still-near-pandemic-era-low-11675949780   5 - https://www.freddiemac.com/pmms   6 -  https://www.globest.com/2023/02/06/sfr-is-well-positioned-even-as-headwinds-persist/   7 - https://www.globest.com/2023/02/08/2023-will-be-another-strong-year-for-btr-despite-slowing-rent-growth/   8 - https://www.dailybreeze.com/2023/02/07/new-law-in-la-landlords-must-pay-relocation-costs-if-they-raise-rents-too-high/

More episodes from Real Estate News: Real Estate Investing Podcast