The Waiting Game 🧪

In today’s edition:

• SFR industry leaders emphasize patience and discipline
• A refinancing cliff looms for the office sector
• Affordable markets see increased housing demand

🎯 What's Stirring

It’s above my pay grade to make bold statements about the state of the housing market, so I will quote industry leaders. Lawrence Yun, Chief Economist from NAR, called it “unique,” and Dallas Tanner, CEO of Invitation Homes, called it “weird.” So there you go.

Every step of good news forward (easing inflation, strong new home sales, sturdy labor market), seems to be followed by one or two steps back (fewer housing starts, historically low small business sentiment, low inventory). It’s as if we are all waiting to run a race that is delayed by false starts. Is it time to run yet? Will the race start as soon as the Fed stops its rate increases?

• A pause in interest rate increases will not automatically trigger a refreshed stock market. Going back to 1982, the S&P 500 returned an average of 19% in the 12 months after the federal funds rate peaked, but things are different now. “We’re in this period of calm right now because there’s clearly no sign of recession just yet,” said Jeff Schulze of ClearBridge Investment. Labor is still strong, and while inflation is easing it is still “too high and so my job is not done,” said Fed governor Christopher Waller. Investors say it is best to create a portfolio that can withstand a variety of outcomes rather than trying to predict the future.
• SFR industry leaders gathered at the National Rental Home Council’s annual conference in Nashville. Speakers at the conference emphasized patience and discipline with capital, focusing on strong operations instead of rapid growth, keeping the resident at the core of the business, and expanding into Section 8 housing vouchers. Oh, and ChatGPT may have come up a few times as well.
• The housing shortage is not up for debate, but quantifying the shortage is. Some estimates cite the imbalance of household formations and housing starts over the last decade while others look at the limited access to affordable and workforce housing. John Burns Research & Consulting provides a more optimistic view of the shortage taking into account existing vacancies in addition to demographic trends.
• The vacancy rate for office buildings has made headlines, but does the work-from-home revolution spell doomsday for commercial real estate? Retail and apartment vacancy rates remain low, and hotels are reporting record revenue per available room. The thing to watch this year is the “refinancing cliff.” Almost a quarter of mortgages on office buildings must be refinanced in 2023 with much higher interest rates and vacancy rates than when the loan originated.
• The 2023 Housing Market is not as straightforward as it was in recent years when the constant seemed to be historic increases in home price appreciation and rent rates. Now some of that has softened, but it will continue to be a sellers’ market until next year at least. What are the key factors in today’s market? Home prices remain elevated and have outpaced income growth, inventory is low due to the lock-in effect of cheap mortgages, housing starts are down, and more high-income earners are renting.

📊 PlanOlabs Insights

Proprietary insights into the SFR industry from our research and consulting team

An ongoing study from PlanOlabs shows a significant increase in the usage of watermarks on photos for Enterprise Property Managers / Owner Operators, from 52% in 2021 to 73% in 2023. We also saw a significant difference between Enterprise PMs and Mid-Market PMs with watermark usage. To read more about this trend with watermarks, and to see examples of the current industry standard, check out the full blog post here.

For more PlanOlabs insights, visit our blog.

🔍 I Like Big Data (Releases) And I Cannot Lie

All the relevant data releases from the past month

• The Consumer Price Index increased 5% over the last 12 months (compared with 6% in February) - this was the smallest 12-month increase since the period ending May 2021.
• The Single Family Rent Index continued to cool, to 5% YoY in February 2023, compared with 5.7% in January.
• Residential Building Permits were down 8.8% MoM in March 2023, compared with a MoM increase of 13.8% in February.

For the rest of the housing and economic indicators we track, check out the full blog post here.

📰 SFR In The News

Everyone knows this stuff and you should too

• Appreciate announces their preliminary full-year 2022 results
• Rently partners with TransUnion to launch a new automated leasing application
• John Burns Research and Consulting has a new name and a new look
• Renew announces its official launch
• PlanOmatic (that's us!) publishes a whitepaper on 3D Tour Case Study findings and research

The Beaker is a bi-weekly briefing from PlanOmatic on the economy, housing, and the forces shaping both. Have something we should cover? Reply to this email.

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