According to a recent report from Green Street, the single-family rental market showed strong performance in 2023 but did not meet expectations. Despite this, the sector is expected to experience steady growth in both market rent and occupancy over the next five years.
The consulting firm based in Newport Beach, CA predicts a ~4% increase in market rent from 2024 through 2028. This can be attributed to several factors including a growing gap between owning and renting costs, limited savings for down payments among renters, an increasing population of individuals aged 35-44 years old, and minimal supply growth.
While landlords are likely to maintain their pricing power during this time period, they will also face challenges with expense growth. Green Street estimates mid-7% expense growth for the sector due mostly to high real estate taxes and insurance costs as well as accumulated deferred maintenance expenses resulting from low turnover rates over previous years. However despite these obstacles,the average NOI is still projected at around 5% annual growth over the next five years – ranking it among one of top performing property sectors out of approximately twenty covered by Green Street.
Overall,the outlook remains positive for single-family rentals despite potential headwinds faced during 2023.
