Table of Contents
Executive Summary

1

The Supply-Side Shortfall2

⸀ Ownership Demand & Demographics Heightening the Scarcity of SFR

5

⸀ Lifecycle & Lifestyle Drive Demand7

⸀ Home Purchase Affordability Has Plummeted
⸀ Providing & Preserving Quality Housing Options



6. A Long-Term View on Home Values & Single-Family Rents
ConclusionExecutive Summary
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entry-level single-family housing.
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1

1. The Supply-Side Shortfall
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Section 1 Chart 1

Section 1 Chart 

Signifcant shortfall in homeeuilding for more

Developers have placed greater emphasis on

than a decade

multifamily

Housing Starts (millions, SAAR)

Starts Per 1,000 People

Single-Family

Multifamily

Single-Family Historical Avg

Total Housing Historical Avg

SF SIarIC Per 1,000 PeBMDeG
Age< 30-64
SF Average

MF SIarIC Per 1,000 PeBMDeG
Age< 20-34
MF Average

Source: U.S. Census Bureau (January 2024), U.S. Department of Housing and Urban Development, Roofstock Research© 2024 Roofstock Inc.

2

On a nominal basis, the data shows that recent new single-family
home construction is on a par with the average number of homes
built annually since 1960. So, the level of activity has actually beenquite low relative to today’s much larger population. For a better
relative picture, Chart 2 showing starts relative to the size of certain
population segments, relfects how single-family starts have run
below trend since the Global Financial Crisis (GFC), while multifamily
starts have been running near or above trend for the past decade.
The data show housing development overemphasized multifamily inrecent years, and failed to make the pivot to single-family even as thedemographic trends were clear. 
 The economic consequences of the GFC on homebuilding wereconsiderable and ampliifed by capital lfowing to multifamily
construction in the years that followed. According to the U.S. Bureauof Labor Statistics, single-family general contractors, a group that far
outnumber multifamily general contractors, employed 27%, or
13,000, fewer workers in 2023 than they did on average in the
2000s. By comparison, multifamily general contractor employment
was up over 61%, albeit from a much smaller base.
 The employment story speaks to the country’s diminished capacity tobuild new single-family residences. With unemployment still below
4.0% overall as of February 2024, ifnding workers will bechallenging. Relief may come from decreasing construction activity inother areas, including multifamily housing, but geographic and skills
mismatches mean this is not a switch that can suddenly lfip.

Section 1 Chart 3

The GFC devastated single-family
general contractors; employment has
yet to recover
New Single-Family G.C.
Emp. (000s, SA)

New Single-Family
General Contractors

Total Emp.
(000s, SA)

Total

Source: U.S. Bureau of Labor Statistics (January 2024),
Moody’s Analytics, Roofstock Research
Section 1 Chart (Remodeling, not new homeconstruction has been the primary job
creator within residential construction
Employment (000s)

2000s Avg.

202¸ Avg.

Source: U.S. Bureau of Labor Statistics (January 2024),
Moody’s Analytics, Roofstock Research© 2024 Roofstock Inc.

3

Section 1 Chart 5

Permii daia thow overall houting
contiruciion unlikely io ramp ups
Housing Permits (millions, SAAR)

Permitting activity suggests construction is pivoting towards singlefamily, but the rise in single-family permits is not as pronounced as it
would need to be to satisfy unmet demand. Dwindling multifamily
permits indicate that overall residential construction will not see
much of an uptick. As a result, housing will remain in short supply
for the foreseeable future. Institutional capital targeting allocations
to SFR investments can play a role in reversing this trend ofundersupply by making investments in build-to-rent projects, but so
far this capital has had limited impact at the national level.
It is noteworthy that entry-level supply has been even moreconstrained as homebuilders have focused on building larger homes.
There has been a downward trend in the share ofhomes completed that are under 1,800 sf over the past two

Single-Family

Multifamily

Source: U.S. Census Bureau (January 2024), U.S.
Department of Housing and Urban Development

decades. These homes were just 23% of completions in 2022 versus
over 35% of completions during 1999-2000. First-time homebuyers
have felt this skew towards higher-end homes acutely as there has
been very little new, entry-level product available for purchase.

Section 1 Chart \_Buildert have thunned eniry-level
homet at ihey teek io maximize profits
Homes Õß,ÚØØ sÞ SÔÑre oÞ SingleÏÎÑmilå
Completions (%)

Housing availability and affordability go hand in hand and new
supply, particularly at the entry-level, is the only real solution here.
This is especially true given the demographics we previously
discussed. ounger households will want entry-level options as they
make the pivot to single-family housing. Indirectly, lack of supply isalso discouraging more current homeowners from selling as there
are limited options to move. This is amplied by the lock-in effectcreated by the ultra-low mortgage rates in the years preceding theFed’s 525 basis point rate hike cycle that began in March of 2022.
We take a closer look at home prices and affordability later in thispaper, but rst let us eamine the demand side of the e uation.

Source: U.S. Census Bureau© 2024 Roofstock Inc.

4

Populoiea

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Section 2 Chart 1

Section 2 Chart 2

Avg. Annual Population Change by Age Cohort (000s)

Population (millions)

Strong growth in key SFR population cohorts
set to continue

203 to 2023

2023 to 2030

35-44-year-old share of population will risethrough the end of the decade35-44 Year-Olds

Share of Total Population

35-44 Year-Olds +*are

Source: U.S. Census Bureau, Moody’s Analytics, Roofstock Research© 2024 Roofstock Inc.

6

Section 3 Chart ç

Section 3 Chart 225-34 Year-Olds Living With Parents (%)

Median Age At First Marriage

Young adult living arrangements should begin
to trend back to historical norms

Delayed marriages mean pivot to single-family
housing on the horizon for many

Men

Women

Source: U.S. Census ureau{ Current Poulation Surve

This data compounds into marriage and childbirth. Census
data show the median age at frst marriage has increasedby 1.2 years for men and 1.8 years for women over the
past decade to 30.2 and 28.4, respectively (see Chart 2).
According to the CDC, the average age of frst-time
mothers increased by 1.7 years from 2011 to 2021 to 27.3
years of age.
Not surprisingly, the average age of frst-time homebuyers
has also risen, jumping from 31 years-old in 2012 to

36 years-old in 2022, per data from Self. All thesedeferred events result in a higher concentration of younger
adults having yet to reach a point in life where singlefamily housing is seriously considered, and even desired.
We will explore this further in the next section of thepaper, but low home purchase affordability is expected tobolster demand to rent these types of homes. Some
individuals will also worry about the long-term fnancial
commitment and geographic mobility anchor created byhomeownership.Ù

Section 3 Chart 3

Section 3 Chart 6

Avg. Age of First-Time Mothers

Avg. Age of First-Time Homebuyers

Source: U.S. Centers for Disease Control and Prevention (CDC)

Source: Self{ uillot

Many couples just getting to the stage where
neighborhood safety and school quality isparamount© 2024 Roofstock Inc.

Delayed life events and reduced affordability
have greatly increased the age of frst-timebuyers8Morw fwxialw aore aihweulwa sne s highwr ahsrw of pwoplw aoreing from homw poatepsnewmii srw
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thw of iw fw esda s awweek

Section 3 Chart 5

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Source: Kastle Systems, Moody’s Analytics© 2024 Roofstock Inc.

9

4. Home Purchase Affordability Has Plummeted
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Section 4 Chart 1

Home prices have weathered the siaiifcait iicrease ii mortaaae rates
S&P Core Logic Case-Shiller Home Price Index (20-Metro Composite)

Source: S&P Dow Jones Indices LLC, CoreLogic, Inc.

© 2024 Roofstock Inc.

10

Beyond a lack of supply and favorable demographic
trends, the solid nancial footing of .S. homeowners
has contributed to the resiliency of home prices and thestrength of the housing market generally. In addition to
the substantial home e uity created by dramatic priceincreases, Census data through 2022 show a record
number of homes owned free-and-clear of debt. Someof this is owed to demographics as the large Baby
Boom generation has been in their homes for a long
period of time and paid down their debt.
The data also show that households took advantage oflower rates and locked them in through xed-rate
mortgages. Notably, for a two-and-a-half-year period
beginning in the third uarter of 2019 through the endof 2021, the interest rate on new 30-year xed rate
mortgages was below the prevailing rate on all
residential debt outstanding. Additionally, over 95% of
all new mortgages completed during the two-year
period beginning in the second uarter of 2020 andending in the rst uarter of 2021 had xed interest
rates.
Chart 3 shows the conditions creating the so-called“lock-in effect.” After taking on long-term, low interest
rate, xed-rate debt, many owners feel locked into theircurrent residences. According to the Joint Center for
Housing Studies (JCHS), 60% of borrowers had amortgage rate below %.0% in mid-2023. By the end of2023, the spread between the interest rate on a new
30-year mortgage and the effective mortgage rate on
outstanding residential debt was 350 basis points $wider than at any point since 1982. Expressed as aratio, the rates on new loans were 1.92x the rate on
outstanding residential debt $ a record high.
Households are far less inclined to move with interest
costs essentially doubling. Qow-rate mortgages havebecome an asset, tying households to their current© 2024 Roofstock Inc.

Section 4 Chart 2

A record number of homes were owned freeand clear in 2022
Owner-Occupied Housing Units

Units Owned Free & Clear(000s, LHS)

Share of Units Owned Free
& Clear (RHS)

Source: U.S Census Bureau, American Community Survey
Section 4 Chart 3

Consumers locked in cheap debt while rates
were low and are loath to leave these loans
Interest Rate (%)

Proportion of New Loans
with Fixed Interest Rates (%)

Effective Mortgage Rate on
30-Yr. Fixed Mortgage Rate
Outstanding Residential Debt
on New Loans
New Loans Fixed Interest Rates (RHS)

Source: U.S. Bureau of Economic Analysis, Freddie Mac, U.S. Federal
Finance Agency (FHFA) (December 2023)
11

Section 4 Chart Ì

homes and compounding the issues created byinsuffcient new construction..

Starts (SAAR, 000s), Homes Listed for Sale (000s)

Economic conditions are heeping eeisting and woued-behome buyers participate in the market and contributing
to eow mortgage deeinquency rates. Unempeoyment
has been beeow 41 for the eongest stretch in 41 years
and wages are rising. But the eack of suppey, pricegrowth, and higher mortgage rates haee caused
affordabieity to peummet..

Lack of homes listed for sale has compounded
the supply problem

Single-Family Starts

Homes Listed for Sale

Source: U.S. Census Bureau, National Association of Realtors,
Moody’s Analytics

Section 4 Chart 5

Mortgage rates have reduced the affordable
price point of homes
Principal & Interest Payment (30-yr. mortgage, 20% down
payment)$00K Home

Using the current 31-year mortgage rate and assuming
a 211 down payment, the monthey mortgage payment
on a $311,111 house today is the same as the
mortgage payment for a $411,111 home in March of
2122. Moody’s Anaeytics’ affordabieity indee shows thatin mid-2121 the typicae househoed coued afford 0871
of the mortgage on a typicae home an indee eeeee of
087). That fgure dropped to 0101 or an indee eeeee of010) by the end of 2123, its eowest eeeee since the earey081s. By this metric, the typicae househoed has ust
enough income to afford the mortgage payment on the
typicae home. This aeso assumes that the typicae
househoed can make a 211 down payment on thehome, which is a non-starter for many househoeds.>>$400K Home

Source: ©reddie Mac, Roofstock Researc© 2024 Roofstock Inc.

12

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Section 4 Chart 6

Section 4 Chart 7

Housing Affordability Index

Monthly Rent/Home Payment

Ownership Affordability has fallen to its lowest
level in over 40 years

Relative affordability of rent has increased
dramaticallyrns Single-Family Rent Index(Mid Tier)

Bu

Source: National Association of Realtors, U.S. Census Bureau, U.S.
Bureau of Economic Analysis, Moody's Analytics© 2024 Roofstock Inc.

Home Payment(Entry-Level Home)

Source: John Burns Real Estate Consulting (March 2024)

13

These issues are accentuated by the exposure of asignifcant portion of U.S. housing supply to climate
related events. The JCHS noted that 41%, or 18.2
million rental units, were in high-risk areas forenvironmental hazards. This percentage was evenhigher for single-family rentals, at 45%. Institutional
investment can help solve the capital needs of theexisting housing stock while improving home effciency
and resiliency to climate-related events. The NOAA’s
National Centers for Environmental Information 2023
Billion-Dollar Disaster report showed that the count ofbillion-dollar climate disasters in the U.S. set a record
last year at 28, eclipsing the previous record of 22 set
in 2020.3
Climate risks are manifesting themselves throughphysical damage to homes, reduced health and wellbeing of residents, signifcant maintenance and capital
expenditures, and high and rising utility and insurance
costs. The upward trend in such events highlights theimportance of involving long-term investors withaccess to capital in the single-family market. Not only
can these investors offer households an attractive
rental option, they can also make the improvements
necessary to modernize the nation’s critical housing
infrastructure and ensure that it remains resilient toclimate-related risks.2

Section 5 Chart 1

Half of U.S. homes were built before 1980
Distribution of U.S. Housing Stock by Year Built

Owner-Occupied

Renter Occupied

Source: U.S. Census Bureau, American Community Survey (2022)

Section 5 Chart È

Climate-related disasters growing in frequency
and cost
Billion-Dollar Weather & Climate Disasters
Cost/Year (billions, C/ adjusted)

Events/Year

Events/Year

Cost/Year

Source: NOAA National Centers for Environmental Information(NCEI), Roofstock Research© 2024 Roofstock Inc.

15

Housing is a necessity in short supply that is viewed asa home, not an investment, by most owners. This
characteristic tends to result in growth through allphases of the business cycle. The housing bust thatwas the driving force behind the 2008 GFC is a notable
exception to this rule and home prices did not bottom
for more than two years after that recession offciallyended. Similar comments about the resilience of homeprices can be made as it pertains to periods of risinginterest rates, as we see most notably with prices rising
despite increases in rates both during the early 1980s
and today.
This value growth is also one aspect of the sector’sination*hedging characteristics as values haveappreciated faster than CI. -ver the past 30 years, CI
has increased by 2.5% annually versus 4.4% for homevalues. SFR landlords have also enjoyed rent growth inexcess of ination, with data from Mohn Zurns Real
Estate Consulting showing average annual rent growthof 3.4% over the past 30 years.
Resilience through cycles and attractive growth andination*hedging characteristics provide compellinginvestment rationale for institutions considering an
allocation to SFR. Zut there are certainly otherconsiderations such as its correlation to other asset
classes and property sectors and relative li4uidity
versus other types of CRE. 1dditionally, the publicmarkets show SFR REITs’ strong track record in terms ofabsolute performance. Pe will tackle the sector’s ability
to enhance portfolio performance more directly in afollow*on paper.

Section 6 Chart 2

Stogle-flmtly vllues lod reoas hlve griwo flsaer ahlo toflation
Index (1984=100)

Source: John Burns Real Estate Consulting, FHFA, U.S. Bureau of Labor Statistics, Roofstock Research© 2024 Roofstock Inc.

17

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T  PAP R   N T C NT T T AN FF R T   R T   C TAT N F AN FF R T B  AN  C R Ts4