By DON FENLEY
GRAY, Tenn. – A new analysis from Attom Data Solutions shows the average vacancy rate for single-family rentals in the Tri-Cities area – including Greeneville – is 2.6%. The news comes on the heels of reports from the National Association of Realtors® (NAR) and the Tri-Cities Apartment Association (TCAA) that the vacancy rate for local apartments was 3.3%. It was the second tightest market in East Tennessee and lower than the U.S. rate.
The lack of rental properties equals – if not exceeds – the shortage of new and existing homes for sale. It has also prompted some to ask if the region has too much rental property.
Current counts show the region’s single-family rental inventory is 65,983 houses and townhomes. There are 6,441 apartment units, according to NAR. Since there are 214,403 occupied housing units in the region, the rental share is close to 31%. That’s slightly below the 36% national share. Of course, the ratio of owner to renter-occupied households varies widely by community. There are also a little over 1,000 short-term airbnb rentals in the region.
For example, Census reports show 34% of the Bristol, TN households are occupied by renters. In Johnson City, the share is 51%, and it’s 38% in Kingsport. Greeneville’s share is 42%.
High demand and low rental inventory have caused rents to spike. It’s also sparked a flurry of big and small investor interest in the apartment market. The July NETAR Commercial Real Estate Report shows that so far this year, multi-family sales are up 11% from last year.
Despite all the notices and offers, institutional single-family rentals are barely registering on home sales reports. An institutional investment is a home sale to a non-lending entity that has purchased at least 10 properties in a calendar year. However, there are new build-to-rent developments in both the development and planning stages.
There is an uptick in the advice to builders about the advantages of the build-to-rent trend. Maegan Sherlock, a research analyst writing in a current John Burns Real Estate Consulting blog, says home purchases are going to be delayed for more than just affordability reasons and that rental demand will get stronger. That will create a tailwind for the already robust single-family rental business.
Some builders are beginning to shift their strategies because after a two-year period of it not being possible to build homes fast enough market dynamics have shifted under the weight of rising interest rates and affordability concerns. The outlook is for new home demand to remain strong – just not as strong as it has been. Attom Data Solution’s current affordability index reported that Washington County is one of the markets were the average working person does not have the buying power to qualify to buy a median-priced home. Things are not quite to that status in Sullivan County, but it’s index has been declining for the past 15 quarters.
Sherlock said builders are being advised to shift marketing toward renters and focus on converting the 25% of current homeowners who would rather rent into renters and by catering to those who are not satisfied with renting an apartment. The firm’s research shows the top three reasons renters prefer single-family homes over apartments are:
- A private yard
- No one living above or below
- Pet friendly
The number of renters and rental properties – especially single-family rentals – is expected to increase with the growing housing preferences of younger generations and elders – 14% of renters are 65 or older – who want housing with fewer maintenance demands.
Categories: REAL ESTATE