Suburban Rents Climbing Due to Exodus from Cities
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How did the pandemic trigger a suburban exodus and who hosts this report?
Here's your Money Briefing for Wednesday, November 11th. I'm J.R. Whelan for The Wall Street Journal. During the pandemic, many families have fled cities around the country and headed to the suburbs looking for privacy and more room. But the race for space is driving up rents in those communities.
And there are some situations where rent increases on new leases are going to be double-digit percentages more than they were a year ago. If you're living in a house, you're not going to see that same rate of increase. But those companies are asking their tenants to pay more to stay in their homes.
Our reporter Ryan Dezember joins us to discuss who's profiting from this trend and who could be impacted. That's coming up after the break.
City life in the U.S. has been upended by the pandemic, and that's driving renewed demand for homes in the suburbs. Our reporter Ryan Dezember has been looking into how that's playing out, and he joins me now. Ryan, thanks for making the time to discuss.
Who are the corporate ‘mega landlords’ buying single-family homes after the foreclosure crisis?
Thank you for having me.
So first of all, there are a few corporations that are kind of, you know, mega landlords in many suburban areas. They own hundreds of thousands of single family homes. So what's the story behind these homes and who's the target renter?
Well, a lot of these houses were bought for pennies on the dollar after the foreclosure crisis by these companies. Since then, they've bought a lot of houses on the market. They even build new houses. American Homes for Rent has been one of the busiest builders of homes, you know, this year.
What renter demographic are large single-family rental companies targeting?
And they build houses specifically to rent out. The target is basically somebody who would have been looking to buy a house, you know, a generation ago. These are high earning people. They're usually parents. They want space for kids. They want a home office. They want a yard for the pets. And they're typically people in their like late 30s, early 40s, sort of the upper end of the millennials. And there's a lot of younger millennials starting families and coming behind them.
We're seeing people leaving cities around the country, but are there certain places where this is happening more?
Which U.S. regions are seeing the biggest rise in suburban single-family rents?
So these companies own homes primarily in the Sunbelt, around Sunbelt City. So anywhere from California, around Los Angeles and the Bay Area, down into the desert cities. Las Vegas and Phoenix are big areas for this. The big cities in Texas, Atlanta, Florida, up into the Carolinas. Those are the primary markets. Now, we are seeing rents raise also in middle America, places like Kansas City, Minneapolis, Memphis, Birmingham, Alabama. So it's not totally confined to sort of the Sunbelt states or what some people call the smile states, which kind of gets you up more also up into Seattle, which is a hot market for these companies.
Demand is high. So what's that doing to rents?
Well, the big companies that own tens of thousands of houses, they're raising rents faster than they ever have in their sort of short history. We're looking at like 7%, 7.5% month over month, which doesn't sound like a lot, but it is. Again, that's more than they ever have since analysts have been tracking what these companies do.
How much are rents rising on corporate-owned single-family homes compared with mom-and-pop landlords?
And it's much higher than a typical mom-and-pop landlord is raising rents right now.
Now, to be clear, we're talking about rental homes and not apartment units, right?
Yeah, we're talking single family homes in the suburbs, pretty big houses. What you would normally think of is an owned home. These are houses that rent from anywhere from, say, $1,400 a month up to, you know, $2,500 a month. And there are some situations where rent increases on new leases are going to be double digit percentages more than they were a year ago. If you're living in a house, you're not going to see that same rate of increase. But those companies are asking their tenants to pay more to stay in their homes.
You know, Ryan, this sounds like a story of the haves and have-nots. This is all going on while the broader rental market is on the cusp of triggering a housing crisis.
Yeah, absolutely. These companies, when they went out to buy houses after the foreclosure crisis, they really had a certain tenant in mind.
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Chapters
7 chapters
1
How did the pandemic trigger a suburban exodus and who hosts this report?
0:05–1:06
2
Who are the corporate ‘mega landlords’ buying single-family homes after the foreclosure crisis?
1:06–1:35
3
What renter demographic are large single-family rental companies targeting?
1:35–2:06
4
Which U.S. regions are seeing the biggest rise in suburban single-family rents?
2:06–3:10
5
How much are rents rising on corporate-owned single-family homes compared with mom-and-pop landlords?
3:10–5:18
6
Why are younger families renting longer instead of buying despite high incomes?
5:18–7:03
7
Will a COVID-19 vaccine or changing demand undermine corporate rental strategies long term?
7:03–7:55
Speakers
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