Rendering via leasefrontera.com
The second-largest homebuilder in the US is increasing its focus on rental housing, as the homeownership rate shrinks and the rental market surges.
Lennar Corp. has 20,000 rental apartments in the construction pipeline with a value exceeding $5.5 billion, the Miami-based company announced during its earnings conference call on Thursday.
“As an offshoot of the constraint in the mortgage market, rental rates have continued to rise across the country, benefiting our extensive pipeline of rental properties,” chief executive Stuart Miller said during the call. “Rental demand has continued to outpace ‘for sale’ demand, and we expect our maturing rental business to contribute to earnings in the latter part of the year.”
Earlier this month, Lennar launched leasing at its first community of single-family rental homes in Sparks, Nevada. Frontera at Pioneer Meadows will offer 80 new single-family houses available in six layouts, ranging from 1,210 to 2,182 square feet in living space. The residences will be two- to four-bedroom units, with private yards, front and backyard landscaping, stainless steel appliances, granite countertops, wood-style blinds, in-unit washer/dryer and attached two-bar garages. Rents will start at $1,399 per month.
Miller described Frontera as a test “hybrid between our for-sale and our multifamily apartment community program,” Bloomberg reported. “If the rental concept doesn’t work as well as we’d like, we can always convert to a for-sale platform.”
In the fourth quarter of 2014, the US homeownership rate declined 1.2 percent from the previous year to 64 percent — the lowest level in almost 20 years, according to data released by the Department of Commerce. This rate was the lowest recorded since the first quarter of 1994, when 63.8 percent of American households owned their homes (we tracked the home ownership rate from 1980 to 2014 here).
Meanwhile, the number of renters has increased by almost 10 million in the past decade, according to the National Association of Realtors. In 70 major metro areas, the typical rent climbed 15 percent from 2009 to 2013, with leaps as high as 50 percent in the New York-Northern New Jersey-Long Island region.
Due to adverse winter weather, single-family home starts declined 15 percent in February from the previous month to an annual pace of 593,000, the Commerce Department reported last week. The historical average for single-family home starts since 1995 has been 1.04 million.