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Jake and Stephanie Murphy are moving into a new single-family rental home built by American Homes 4Rent.

Diana Olick | CNBC Real Estate Correspondent

As demand for single-family rental homes soars, large landlords are jumping into the home construction business to make up for the falling supply.

The push comes as more Americans have the flexibility to work from anywhere and are looking for larger spaces with outlying areas.

“This market is in short supply. There just aren’t enough quality homes for the number of American households,” said David Singlin, CEO of American Homes4Rent, which has built more than 100 rental-only communities over the past five years. .

According to the National Association of Home Builders, 13,000 new single-family homes began as rentals in the first quarter of this year, up 63% from a year ago. Home-built-for-rent still represents just 5% of the home building market, but according to the association it is above the historical average of 2.7%.

In Mooresville, North Carolina — about 30 miles north of Charlotte — the latest development from American Homes 4 Rentals includes more than 220 rental homes with access to amenities including a pool and fitness center. Landscaping and maintenance is included in the rent.

Jake and Stephanie Murphy, who have been able to work remotely since the pandemic, are among those who relocated to the community after selling their home in California. They could buy, but they opted to rent a four-bedroom house for their family for $2,400 a month.

Stephanie Murphy, 29, said, “We’re not sure if housing prices will really stay where they are now.

Murphys also said that he liked the flexibility of being hired as they learn about a new area.

Rent numbers are now declining slightly, as some small landlords sell their homes at the top of this expensive market. But Singlin expects to continue building homes for rent over the next few years based on the strong demand he says he is looking at.

“How many inquiries are we getting? How many performances? How many applications are we getting at every available home? It’s two to three times more today than it was two years before the pandemic,” Singlin said.

Other companies investing in the build-for-rent market include lenar, Dr. Horton, Taylor Morrison and the Toll Brothers. Invitation Homes, the largest publicly traded homeowner, entered a joint venture with homebuilder Pulte Homes last year to build more rental homes.

Investing in single-family rentals — both buying older homes and building new ones — has increased dramatically. According to John Burns Real Estate Consulting, the sector saw investments of around $3 billion in 2020. In 2021, this figure increased to $ 30 billion. It is expected to reach $50 billion this year as large institutional investors, home builders and landlords enter the market.

Like most large landlords, American Homes4Rent got into business during the Great Recession when millions of homes went into foreclosure. The company often snatched up cheap, distressed properties on the auction block, and turned them into lucrative rentals.

At the previous housing peak, there were 11.6 million single-family rental homes in 2006. That figure rose to 15.5 million in 2014 after the housing market crashed, according to John Burns Real Estate Consulting.

But rising demand and tighter supply also mean that renting homes are becoming less affordable. Nationwide, single-family rents are up more than 13% from a year ago, according to CoreLogic.

“The paucity of single-family properties available to rent has plagued the market, driving up rents to record-level rates,” said Molly Bossel, principal economist at CoreLogic. He noted that the number of single-family rental properties listed earlier this year was well below pre-pandemic levels.

Back in Mooresville, North Carolina, Murphy is watching how the market plays out. But Jake Murphy said he doesn’t believe homeownership is part of the American Dream, and is enjoying renting out for now.

“I’m excited because you look around the neighborhood, Texas is like license plates and New York, and then we have California,” he said.

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