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30 THE RISE OF THE MID-SIZE SINGLE FAMILY-RENTAL INVESTOR Commentary by Forbes says that the rise of technology is making single-family rental investments and management easier, leading to the rise of the midsize investor. Forbes adds that institutional investors own less than 2% of single-family homes, while investors with fewer than 10 units own 87%. "e biggest increase in market share over the past year has come among investors owning six to 10 single-family rentals, followed by those owning between 11 and 100 rentals," said Daren Blomquist, SVP at ATTOM Data Solutions. "ese smaller to mid-tier investors are benefiting from newfound efficiencies in acquisition, financing, and property management that allow them to buy outside their backyard in areas with higher potential returns and to leverage their money to buy more properties." Areas best suited for smaller-level investors are often labeled up-and-coming are "ideal locations" for single-family rental investors. "For one thing, the price-to-rent ratios are often much more attractive, while yields tend to be higher," the report states. "Properties in less densely populated areas are also better insulated against a downturn in the housing market as well. Meanwhile, properties in saturated markets are currently performing the worst." e markets labeled up-and-coming include Charleston, South Carolina; Columbus, Ohio; Tempe, Arizona; Evanston, Illinois; Decatur, Georgia; Alpharetta, Georgia; Boise, Idaho; and Jacksonville, Florida. Additionally, investors are advised to look for low-risk, high-return counties with potential yields of at least 10%. Up-and-coming markets include markets with property taxes lower than 1% and vacancy rates of no more than 5%. According to Realtor.com, investors are using the popularity of single-family rental to their advantage. Real estate investors purchased 7.7% of all homes in the second quarter of 2019, up 0.6% year-over-year, the most speculation the market has seen since 2013. St. Louis is considered the most appealing destination for both flippers and landlords, with 18.8% of sales as investment properties. "Twenty years ago, [real estate investors] were all locals," says St. Louis broker and landlord Dennis Norman of MORE Realtors. Now, "we have a lot of investors from California, from Colorado, and even international investors." WHAT DRIVES EARLY- STAGE DELINQUENCY RATES? Delinquency rates have been declining around the U.S., but not for everyone, according to the latest Mortgage Monitor report from Black Knight. Early-stage delinquencies have been on the rise, and these increases were the most pronounced among first-time homebuyer loans. "We've seen early-stage delinquencies rise over the last several years, with the increase being driven primarily by purchase loans," Black Knight Data & Analytics President Ben Graboske said. Black Knight's data reveals that the increase has primarily been driven by a rise in early-stage delinquencies among purchase loans. Nearly 1% of Q1 2019 originations were delinquent six months post-origination. However, the report notes that while less than a third of the 2000-2005 delinquency average of 2.93%, this figure is up more than 60% over the past 24 months and the highest since 2010. Additionally, despite rising early-stage delinquencies among first-time homebuyers, mortgage performance has been improving overall. According to Black Knight, strong performance in September saw the national delinquency rate ticking up just 0.08% seasonally, a 2% increase from one month prior, and less than half the seasonal increase typically seen for September over the past 19 years. "ough there has been some softening in GSE purchase loan performance, it hasn't been to the extent seen among entry-level buyers," Graboske adds. "All in all, first-time homebuyer originations combined between the GSEs and GNMA increased by nearly 50% between 2014 and 2018. However, whereas first-time homebuyers represent just over 40% of GSE purchase loans, they make up 70% of the GNMA purchase market." e national delinquency rate remains within 0.17% and is 1.13% below its pre-recession (2000-2005) average. However, the rate of improvement has begun to slow noticeably. Excluding hurricane-impacted areas, the six-month average annual rate of decline had narrowed to less than 1% in recent months, suggesting that while performance remains strong, we may be nearing the trough in the national delinquency rate. Serious delinquencies continue to fall as well, and are now down 14% from last September, the lowest serious delinquency rate since June 2006. Foreclosure sales are down 14% year-over-year.

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