CSGP - Single-Family Rentals: Shelter From Stagflation

• Amid mounting recession worries and a return of heart-stopping market volatility, residential REITs - particularly the traditionally countercyclical single-family rentals - should prove to be a source of relative shelter.
• Single-Family Rental REITs were born from the last economic crisis when a cascade of foreclosures enabled a new class of institutional rental operators to emerge by buying distressed properties en-masse.
• Similar distress in the U.S. housing market is highly unlikely given the underlying supply constraints resulting from a decade of underbuilding, and ironically, due to the presence of well-capitalized institutional investors.
• Persistent inflation is eroding built-up stimulus savings, but given that housing and food are the ultimate "essential" expenses, the slowdown will have to get awfully ugly to see widespread tenant credit issues given the higher-income tenant profile of SFR REITs.
• SFR REITs enter this uncertain period on solid footing, benefiting from historically favorable Buy vs. Rent economics. Recent updates show double-digit rent growth continuing, and we expect that higher mortgage rates will ultimately fuel accretive portfolio growth opportunities.

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