Residential REITs own and manage various forms of residences and rent space in those properties to tenants. Residential REITs include REITs that specialize in apartment buildings, student housing, manufactured homes and single family homes. REITs own more than 1 million residential units, including 8,300 student apartments and 370,000 manufactured homes, as well as more than 200,000 single family homes.
With mortgage interest rates still over 6% and inventory low, the housing market remains tight in 2025. This has locked many young people out of purchasing their first home. The National Association of Realtors (NAR) reports that first-time home buyers currently make up 24% of the market, the lowest share since NAR began collecting the data in 1981. With such a tight housing market, many Americans remain in the rental market.
The apartment market experienced a glut of new supply after rents soared during the pandemic; apartment construction boomed through 2022. With new supply coming online, rent growth dropped and, according to CoStar data, demand did not keep pace with supply through 2024. Construction has since slowed, which should lead to a rebound in rents in the near future.
The oversupply in the apartment market has kept rents flat for the past several quarters. REIT Industry Tracker from the first quarter of 2025 data shows although apartment REITs had occupancy rates well over 95% through 2024 and the first quarter of 2025, residential REIT FFO was down 2.7% from the previous year in the first quarter of 2025.
Year-to-date returns through June 5 for residential REITs are down 1.9%, while the FTSE Nareit All Equity REITs index is up 1.6%. Although the property sector as a whole is down, single family rental returns are up 2.1% year-to-date. Unlike apartment buildings, housing starts for single family rental homes did not experience the same surge and excess supply according to Census Bureau statistics, keeping rent growth strong. Returns for manufactured homes are flat year-to-date.
- 17: After years of declines, the average size of a rental apartment increased 17 square feet from 2022 to 2024 to 908 square feet according to RentCafe.com.
- 50: According to Bankrate, it was cheaper to rent than to buy in all the top 50 U.S. metro areas in February 2025.
- 20.6 million: Trade publication for the manufactured housing industry, MH Insider, estimated that 20.6 million people in the U.S. lived in a manufactured home in 2024.
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