Colin Trovato, portfolio manager at Ranger Global Real Estate Advisors, was a guest on the latest episode of Nareit’s REIT Report podcast. Trovato discussed housing trends and the role of the single family rental (SFR) sector in helping to alleviate the shortage of supply.
Trovato discussed the impact of rising interest rates on home ownership and the demand for SFRs. Higher rates since 2022 have increased home buying costs and reduced housing inventory, as many current homeowners are reluctant to move due to their favorable mortgage rates. This scarcity has boosted demand for SFRs, making renting more attractive compared to buying.
Trovato noted that despite potential future decreases in interest rates, renting remains significantly more cost-effective than buying. The large difference between renting and owning, combined with the ongoing underbuilding of housing, supports sustained demand for SFRs, he said.
REITs, including AMH (NYSE: AMH) and Invitation Homes Inc . (NYSE: INVH), are addressing the housing shortage by building new properties and updating existing ones, Trovato said. They are expected to play a growing role in the housing market, particularly as they refine their build-to-rent models, he added.
SFRs have shown steady performance, avoiding the downturns seen in multifamily sectors during the COVID-19 pandemic and benefiting from longer tenant stays. Looking ahead, Trovato anticipates that SFRs will increasingly contribute to the broader housing market due to their flexibility, reliability, and the ongoing need for housing solutions.