A home in Roseville owned by Invitation Homes and offered for rent on April 2, 2013 in Roseville, Calif. Blackstone, a New York hedge fund, became the largest landlord of single-family homes in Sacramento, after spending close to $200 million to buy more than 1,250 houses, which the firm manages through Invitation Homes. Some home builders are now following suit by constructing homes to rent. Others are thinking of asking Invitation Homes to manage rentals that they may build in the future. Paul Kitagaki Jr. pkitagaki@sacbee.com
A home in Roseville owned by Invitation Homes and offered for rent on April 2, 2013 in Roseville, Calif. Blackstone, a New York hedge fund, became the largest landlord of single-family homes in Sacramento, after spending close to $200 million to buy more than 1,250 houses, which the firm manages through Invitation Homes. Some home builders are now following suit by constructing homes to rent. Others are thinking of asking Invitation Homes to manage rentals that they may build in the future. Paul Kitagaki Jr. pkitagaki@sacbee.com

Business & Real Estate

These new homes have shiny appliances and granite counters, but you can’t buy them

By Hudson Sangree

hsangree@sacbee.com

November 20, 2017 03:55 AM

UPDATED November 21, 2017 08:43 AM

One of Roseville’s newest subdivisions features 60 single-family homes with granite counters, stainless steel appliances and two-car garages.

The homes aren’t for sale, however. They’re for rent.

The build-to-rent project by JMC Homes is part of the latest twist on a rental trend that’s been playing out since the housing market hit bottom six years ago.

Back in 2011 and 2012, foreclosed houses were scooped up by the thousands by Blackstone, a big New York investment firm, and other investors. They saw an opportunity to buy houses at bargain prices and rent to those who couldn’t buy or didn’t want to, following the foreclosure crisis.

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That left many wondering what might happen next. Would investors sell all the homes once prices rose sufficiently?

So far the answer is no. Single-family rentals have proven a stable market, and now home builders are getting into the game – either by building homes to own and rent or by providing new houses to the big rental investors.

“We’re going to see partnerships being built between builders and major single-family operators. They want to scale up as much as they possibly can, but the whole era of foreclosures on the courthouse steps is done,” said Dean Wehrli, senior vice president with John Burns Real Estate Consulting in Sacramento.

That likely means builders will reserve 10 or 15 homes in some new subdivisions as rentals, Wehrli said. The practice was more common after World War II but fell out of favor, both because it was more profitable to sell houses to families and because renting became a less-popular housing option.

Today, millennials, who saw their parents suffer through last decade’s housing collapse, are more likely to rent until later in their lives.

Renting a single-family home “is sort of a way to become more familiar with single-family living. It’s a bridge between an apartment and buying in a subdivision,” said Greg Paquin, a consultant to the new home industry and president of The Gregory Group in Folsom.

Some home builders have constructed whole neighborhoods of single-family rentals.

In Sparks, Nev., the huge home building company Lennar built Frontera at Pioneer Meadows, made up entirely of single-family rentals. Lennar leases and manages the project.

The neighborhood offers “a new concept of living where you can enjoy the luxuries and offerings of a new single family home with a lock and leave lifestyle,” Lennar says on its website. The company did not respond to inquiries about Frontera in time for this story.

 
 

Closer to Sacramento, local builder JMC Homes is finishing a small subdivision of about five dozen houses on a rectangular plot of land near the corner of Foothills Boulevard and Baseline Road in Roseville. Called Main Street Roseville, the gated community’s houses are hard to distinguish from similar homes for purchase.

The houses are a mix of single-story and two-story craftsman- and mission-style homes with exteriors in various shades of tan. Inside are wood-look floors, dark cabinets and stainless-steel refrigerators. Each house comes with a washer and dryer and a tankless water heater.

The detached houses are densely packed along two main streets, Malibu Place and Impala Circle, and surrounded by sound walls with gates at the entrance and exit.

About 10 houses are currently occupied and a dozen or so are still under construction. Rents for houses listed online ranged from around $2,000 for a three-bedroom, 2 1/2-bath home to $2,500 for a four-bedroom, three-bath home. (The latter figure is about the same monthly payment as a 30-year fixed-rate mortgage of roughly $415,000, plus taxes and insurance.)

JMC did not return emails and phone calls seeking comment.

Residents interviewed by The Sacramento Bee expressed satisfaction with their new neighborhood and their new houses.

“It’s got more of a sense of community than some of the owner-occupied neighborhoods we’ve lived in,” said Jeremiah Miller, who with his family moved into Main Street Roseville after selling a house in Lincoln in July. “We’re all fresh. It’s like the freshman class.”

Miller said he and his wife decided to rent for a year while searching for a home with acreage in the foothills. The new development seemed like a better option in a tight rental market, he said. There were six homes for rent when they applied, he said.

After moving in, the Millers took caramel apples to their new neighbors, created a neighborhood contact list, and put a wreath on their door and a bench on the porch.

A few houses away on Malibu Place, Scott Johnson and Alyce Claire said they were the first renters in the new neighborhood.

Despite having to put up with some construction noise, “we saw it as an opportunity to get more bang for the buck,” Johnson said. The house was all-new and the energy bills were a fraction of what they paid in a 30-year-old rental in Granite Bay, he said.

Claire said she and Johnson plan to buy a new home eventually and saw renting one as a chance to figure out what they did and didn’t like in new construction.

“It was a good opportunity to try it out,” she said.

Some Sacramento-area home builders have said they are talking about ways to work with Invitation Homes, the housing entity created by Blackstone and the nation’s largest single-family landlord. Invitation Homes recently merged with the second-largest single-family rental owner, Starwood Waypoint Homes.

The builders didn’t want to be named because their plans are still preliminary.

An Invitation Homes spokeswoman, Claire Parker, said the company hasn't partnered with any builders to buy or manage single-family home rentals. Starwood Waypoint engaged in a very small amount of such activity before the merger, she said.

Wehrli said builders are likely to proceed cautiously with any plans to build rentals because they don’t want to upset buyers, who may not be too keen on sharing an upscale new neighborhood with renters. But the notion that renters are less prosperous or less desirable as neighbors than owners may be outdated, he said.

“If folks are affording rents in your nice new neighborhood, their incomes are probably similar to yours,” he said. They may not have a down payment “or maybe they have a credit ding, but otherwise they have good incomes.”

These days, he said, many renters rent because they prefer not being tied to a mortgage and home maintenance. Instead they want the mobility that renting allows, and more time to pursue leisure activities.

“They could buy a home, but they don’t want to buy a home,” he said. “A lot of these single-family rental households are doing it by choice, not because they have to.”

Hudson Sangree: 916-321-1191, @hudson_sangree