Michael Madsen’s Post

Move-outs to home purchase are at record lows for many apartment and SFR operators-- not a shock given sticky home prices and high mortgage rates. But nonetheless, these are some remarkable quotes from executives at various REITs from their most recent earnings calls: MAA’s Tim Argo: “The 12.9% of move-outs in the first quarter that were due to a resident buying a home was the lowest ever for MAA.” Camden’s Ric Campo: “9.4% of our move outs in the first quarter were attributed to residents’ buying a home, lowest in our history.” American Homes 4 Rent's Bryan Smith: “Q1 represented our lowest move-out-to-buy that we’ve seen. It’s about 27%. For context, from a historic perspective, it was in the mid-30s.” Invitation Homes' Charles Young: “We see people moving out to buy homes as low as it's ever been in the last few years.” Equity Residential's Mark Parrell: “The percentage of our residents leaving us to buy homes was 7.8%, a continuation of all-time lows.” AvalonBay's Sean Breslin: “During Q1, only 7% of our residents moved out of one of our communities to purchase a home. It wasn’t that long ago that we highlighted 12% to 13% of move-outs to purchasing a home as being low.” Essex's Angela Kleiman: “The percentage of our turnover attributed to purchasing a home has fallen from around 12% historically to 5% today.” given high mortgage rates and sticky home prices, but move-outs to purchase are hitting record lows in many portfolios. I wish the apartment REITs reported move-outs to SFR, as I'd bet some would-be buyers ended up renting single-family homes instead as life stages evolved. And it's worth pointing out that move-outs to purchase are traditionally a lesser reason for move-outs (even if the most interesting one), and OVERALL retention was actually HIGHER in 2021 when more renters were leaving to buy homes. (Far more apartment renters leave to rent other apartments than to buy a house, even in normal times.) So I suspect the challenge of buying homes today are a bigger tailwind for SFR than multifamily, but still a factor to a lesser degree in multifamily. Still, the data and quotes are remarkable -- and speak more to challenges of the for-sale market today than to anything happening in the rental market. #apartments #sfr #housing

Move-outs to home purchase are at record lows for many apartment and SFR operators-- not a shock given sticky home prices and high mortgage rates. But nonetheless, these are some remarkable quotes from executives at various REITs from their most recent earnings calls: MAA’s Tim Argo: “The 12.9% of move-outs in the first quarter that were due to a resident buying a home was the lowest ever for MAA.” Camden’s Ric Campo: “9.4% of our move outs in the first quarter were attributed to residents’ buying a home, lowest in our history.” American Homes 4 Rent's Bryan Smith: “Q1 represented our lowest move-out-to-buy that we’ve seen. It’s about 27%. For context, from a historic perspective, it was in the mid-30s.” Invitation Homes' Charles Young: “We see people moving out to buy homes as low as it's ever been in the last few years.” Equity Residential's Mark Parrell: “The percentage of our residents leaving us to buy homes was 7.8%, a continuation of all-time lows.” AvalonBay's Sean Breslin: “During Q1, only 7% of our residents moved out of one of our communities to purchase a home. It wasn’t that long ago that we highlighted 12% to 13% of move-outs to purchasing a home as being low.” Essex's Angela Kleiman: “The percentage of our turnover attributed to purchasing a home has fallen from around 12% historically to 5% today.” given high mortgage rates and sticky home prices, but move-outs to purchase are hitting record lows in many portfolios. I wish the apartment REITs reported move-outs to SFR, as I'd bet some would-be buyers ended up renting single-family homes instead as life stages evolved. And it's worth pointing out that move-outs to purchase are traditionally a lesser reason for move-outs (even if the most interesting one), and OVERALL retention was actually HIGHER in 2021 when more renters were leaving to buy homes. (Far more apartment renters leave to rent other apartments than to buy a house, even in normal times.) So I suspect the challenge of buying homes today are a bigger tailwind for SFR than multifamily, but still a factor to a lesser degree in multifamily. Still, the data and quotes are remarkable -- and speak more to challenges of the for-sale market today than to anything happening in the rental market. #apartments #sfr #housing

Move-outs to home purchase are at record lows for many apartment and SFR operators-- not a shock given sticky home prices and high mortgage rates. But nonetheless, these are some remarkable quotes from executives at various REITs from their most recent earnings calls: MAA’s Tim Argo: “The 12.9% of move-outs in the first quarter that were due to a resident buying a home was the lowest ever for MAA.” Camden’s Ric Campo: “9.4% of our move outs in the first quarter were attributed to residents’ buying a home, lowest in our history.” American Homes 4 Rent's Bryan Smith: “Q1 represented our lowest move-out-to-buy that we’ve seen. It’s about 27%. For context, from a historic perspective, it was in the mid-30s.” Invitation Homes' Charles Young: “We see people moving out to buy homes as low as it's ever been in the last few years.” Equity Residential's Mark Parrell: “The percentage of our residents leaving us to buy homes was 7.8%, a continuation of all-time lows.” AvalonBay's Sean Breslin: “During Q1, only 7% of our residents moved out of one of our communities to purchase a home. It wasn’t that long ago that we highlighted 12% to 13% of move-outs to purchasing a home as being low.” Essex's Angela Kleiman: “The percentage of our turnover attributed to purchasing a home has fallen from around 12% historically to 5% today.” given high mortgage rates and sticky home prices, but move-outs to purchase are hitting record lows in many portfolios. I wish the apartment REITs reported move-outs to SFR, as I'd bet some would-be buyers ended up renting single-family homes instead as life stages evolved. And it's worth pointing out that move-outs to purchase are traditionally a lesser reason for move-outs (even if the most interesting one), and OVERALL retention was actually HIGHER in 2021 when more renters were leaving to buy homes. (Far more apartment renters leave to rent other apartments than to buy a house, even in normal times.) So I suspect the challenge of buying homes today are a bigger tailwind for SFR than multifamily, but still a factor to a lesser degree in multifamily. Still, the data and quotes are remarkable -- and speak more to challenges of the for-sale market today than to anything happening in the rental market. #apartments #sfr #housing

Move-outs to home purchase are at record lows for many apartment and SFR operators-- not a shock given sticky home prices and high mortgage rates. But nonetheless, these are some remarkable quotes from executives at various REITs from their most recent earnings calls: MAA’s Tim Argo: “The 12.9% of move-outs in the first quarter that were due to a resident buying a home was the lowest ever for MAA.” Camden’s Ric Campo: “9.4% of our move outs in the first quarter were attributed to residents’ buying a home, lowest in our history.” American Homes 4 Rent's Bryan Smith: “Q1 represented our lowest move-out-to-buy that we’ve seen. It’s about 27%. For context, from a historic perspective, it was in the mid-30s.” Invitation Homes' Charles Young: “We see people moving out to buy homes as low as it's ever been in the last few years.” Equity Residential's Mark Parrell: “The percentage of our residents leaving us to buy homes was 7.8%, a continuation of all-time lows.” AvalonBay's Sean Breslin: “During Q1, only 7% of our residents moved out of one of our communities to purchase a home. It wasn’t that long ago that we highlighted 12% to 13% of move-outs to purchasing a home as being low.” Essex's Angela Kleiman: “The percentage of our turnover attributed to purchasing a home has fallen from around 12% historically to 5% today.” given high mortgage rates and sticky home prices, but move-outs to purchase are hitting record lows in many portfolios. I wish the apartment REITs reported move-outs to SFR, as I'd bet some would-be buyers ended up renting single-family homes instead as life stages evolved. And it's worth pointing out that move-outs to purchase are traditionally a lesser reason for move-outs (even if the most interesting one), and OVERALL retention was actually HIGHER in 2021 when more renters were leaving to buy homes. (Far more apartment renters leave to rent other apartments than to buy a house, even in normal times.) So I suspect the challenge of buying homes today are a bigger tailwind for SFR than multifamily, but still a factor to a lesser degree in multifamily. Still, the data and quotes are remarkable -- and speak more to challenges of the for-sale market today than to anything happening in the rental market. #apartments #sfr #housing

Higher mortgage rates + sticky home prices = widening discount to rent apartments in nearly every part of the country right now. Renting versus owning is first and foremost about lifestyle and life stage, not financial calculators. So for that reason and others, I tend to loathe rent-versus-own comparisons. But done the right way, they can provide helpful context for on relative affordability. And by that measure, it's substantially cheaper to rent an apartment than to buy an entry-level home nearly everywhere across the country. This analysis is based on estimated monthly home payments for buyers of entry-level home using realistic assumptions on down payments (i.e. the typical first-time homebuyer is not putting 20% down) from John Burns Research & Consulting versus average monthly rents for market-rate apartments. Disclaimer: The estimated home payments on entry-level homes are for NEW homebuyers. Obviously if you bought years ago when mortgage rates and home prices were lower, the math would be exceptionally different. Takeaways: 1) Markets with the highest rents tend to be places with the highest home prices. So while it's pricey to rent in California's big metro areas, it's comparatively a bargain relative to buying an entry-level house -- with monthly discounts of 55% to 75% in San Jose, San Francisco, Anaheim / Orange County, Oakland, San Diego and Los Angeles. Similar in Seattle, too. 2) In a very different bucket are the red-hot and substantially cheaper Sun Belt and Mountain markets like Austin, Dallas, Fort Worth, Salt Lake City, Phoenix, Denver, San Antonio and Houston. Even though rents are roughly 50% cheaper than California's big metros, these markets STILL retain a nearly similar discount to rent an apartment versus buying an entry-level home. In these cases, that discount of 50-60% to rent versus buy reflects proportionately lots more apartment construction than single-family construction over the last cycle. (Build, baby, build!). Close to that mark are similar markets like Charlotte, Nashville, Raleigh and Orlando. 3) On the other side of this list are Pittsburgh and Detroit, where home prices remain much more affordable than other parts of the country. So even though their apartment rents are among the nation's cheapest, so are home prices, so it's modestly cheaper to make payments on an entry-level home. 4) New York is obviously a unique market where it's almost unfair to compare renting versus owning just because the typical starter home would be located quite far from the typical apartment concentrated in Manhattan or on most urban edges of the other boroughs. 5) Apartment demand (and rent growth) are stronger historically when homes are selling, so I don't want to oversell the takeaways here. You'd also want to better understand the cost of renting an apartment versus single-family home, as households entering a single-family stage of life are likely to do that if they can't afford to buy.

Higher mortgage rates + sticky home prices = widening discount to rent apartments in nearly every part of the country right now. Renting versus owning is first and foremost about lifestyle and life stage, not financial calculators. So for that reason and others, I tend to loathe rent-versus-own comparisons. But done the right way, they can provide helpful context for on relative affordability. And by that measure, it's substantially cheaper to rent an apartment than to buy an entry-level home nearly everywhere across the country. This analysis is based on estimated monthly home payments for buyers of entry-level home using realistic assumptions on down payments (i.e. the typical first-time homebuyer is not putting 20% down) from John Burns Research & Consulting versus average monthly rents for market-rate apartments. Disclaimer: The estimated home payments on entry-level homes are for NEW homebuyers. Obviously if you bought years ago when mortgage rates and home prices were lower, the math would be exceptionally different. Takeaways: 1) Markets with the highest rents tend to be places with the highest home prices. So while it's pricey to rent in California's big metro areas, it's comparatively a bargain relative to buying an entry-level house -- with monthly discounts of 55% to 75% in San Jose, San Francisco, Anaheim / Orange County, Oakland, San Diego and Los Angeles. Similar in Seattle, too. 2) In a very different bucket are the red-hot and substantially cheaper Sun Belt and Mountain markets like Austin, Dallas, Fort Worth, Salt Lake City, Phoenix, Denver, San Antonio and Houston. Even though rents are roughly 50% cheaper than California's big metros, these markets STILL retain a nearly similar discount to rent an apartment versus buying an entry-level home. In these cases, that discount of 50-60% to rent versus buy reflects proportionately lots more apartment construction than single-family construction over the last cycle. (Build, baby, build!). Close to that mark are similar markets like Charlotte, Nashville, Raleigh and Orlando. 3) On the other side of this list are Pittsburgh and Detroit, where home prices remain much more affordable than other parts of the country. So even though their apartment rents are among the nation's cheapest, so are home prices, so it's modestly cheaper to make payments on an entry-level home. 4) New York is obviously a unique market where it's almost unfair to compare renting versus owning just because the typical starter home would be located quite far from the typical apartment concentrated in Manhattan or on most urban edges of the other boroughs. 5) Apartment demand (and rent growth) are stronger historically when homes are selling, so I don't want to oversell the takeaways here. You'd also want to better understand the cost of renting an apartment versus single-family home, as households entering a single-family stage of life are likely to do that if they can't afford to buy.

Higher mortgage rates + sticky home prices = widening discount to rent apartments in nearly every part of the country right now. Renting versus owning is first and foremost about lifestyle and life stage, not financial calculators. So for that reason and others, I tend to loathe rent-versus-own comparisons. But done the right way, they can provide helpful context for on relative affordability. And by that measure, it's substantially cheaper to rent an apartment than to buy an entry-level home nearly everywhere across the country. This analysis is based on estimated monthly home payments for buyers of entry-level home using realistic assumptions on down payments (i.e. the typical first-time homebuyer is not putting 20% down) from John Burns Research & Consulting versus average monthly rents for market-rate apartments. Disclaimer: The estimated home payments on entry-level homes are for NEW homebuyers. Obviously if you bought years ago when mortgage rates and home prices were lower, the math would be exceptionally different. Takeaways: 1) Markets with the highest rents tend to be places with the highest home prices. So while it's pricey to rent in California's big metro areas, it's comparatively a bargain relative to buying an entry-level house -- with monthly discounts of 55% to 75% in San Jose, San Francisco, Anaheim / Orange County, Oakland, San Diego and Los Angeles. Similar in Seattle, too. 2) In a very different bucket are the red-hot and substantially cheaper Sun Belt and Mountain markets like Austin, Dallas, Fort Worth, Salt Lake City, Phoenix, Denver, San Antonio and Houston. Even though rents are roughly 50% cheaper than California's big metros, these markets STILL retain a nearly similar discount to rent an apartment versus buying an entry-level home. In these cases, that discount of 50-60% to rent versus buy reflects proportionately lots more apartment construction than single-family construction over the last cycle. (Build, baby, build!). Close to that mark are similar markets like Charlotte, Nashville, Raleigh and Orlando. 3) On the other side of this list are Pittsburgh and Detroit, where home prices remain much more affordable than other parts of the country. So even though their apartment rents are among the nation's cheapest, so are home prices, so it's modestly cheaper to make payments on an entry-level home. 4) New York is obviously a unique market where it's almost unfair to compare renting versus owning just because the typical starter home would be located quite far from the typical apartment concentrated in Manhattan or on most urban edges of the other boroughs. 5) Apartment demand (and rent growth) are stronger historically when homes are selling, so I don't want to oversell the takeaways here. You'd also want to better understand the cost of renting an apartment versus single-family home, as households entering a single-family stage of life are likely to do that if they can't afford to buy.