People are ‘giving up’ on homebuying: Kinloch Partners CEO

Housing affordability is weighing on potential buyers as home prices continue to rise, the Case-Shiller National Home Price Index shows. As hopes of home ownership slip away for some, Kinloch Partners co-founder and CEO Bruce McNeilage joins Market Domination to discuss the alternative build-to-rent market.

McNeilage explains that people are giving up, and may not enter the market until rates move down to 5.5%. He adds that to his company is receiving “more and more” lease applicants with each home vacancy, but that the industry “98% leased.”

“People are going to have to rent longer than they think,” McNeilage tells Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This article was written by Gabriel Roy

Video Transcript

West pending home sales falling more than expected in May while new home sales hit a six month low housing affordability.

As we were just discussing, that’s weighing on potential buyers as home prices have been hitting highs.

And that has many people still renting with hopes of home homeownership slipping away.

We’re looking at the alternative build to rent market with Kinlock partners, co founder and Ceo Bruce mcneil Bruce.

It is good to have you back on the show and, and I don’t know if you heard that discussion, Bruce.

Listen, I’m, I’m looking at the 30 year fixed here, Bruce Mortgage News Daily tells me it’s 7.05%.

I mean, ok, we’re below the 8%.

Bruce we saw late last year.

I guess that’s a plus.

But if the 30 year fixed is gonna stay around these levels, Bruce, what does that mean for you and your business?

Does that just mean?

Listen, more and more people think I’m priced out.

I’m not owning, I’m gonna look more at renting Josh.

Yes, that’s correct.

People are giving up, they’re giving up for the time being and what we’re being told is rates have to go down to about 5.5% before those people are looking to get to the market.

And then of course, you know, trying to find a house they can afford, houses are not going down in prices.

So what we found is people are staying put if they own, but we’re getting more and more applicants every time have a vacancy and we’re 98% leased.

Our industry is 98% leased.

So there’s not a lot of room, uh and not a lot of places people can go.

So you said 5.5% is where mortgage rates need to fall for folks to get back into the market.

When do you expect that to happen?

Bank of America was out with a new note warning that the housing market could be stuck until 2026.

Is that a realistic timeline in your view?

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Yeah, there’s a saying stay alive till 25.

I think it’s gonna be like pick up in 26.

And so it’s not coming down anytime soon.

The price of houses uh is not coming down.

People are gonna have to rent longer than they think.

And I think you’re looking at least Q three Q four before we get anywhere near that number and that’s next 23 Q 4 next year.

And, and Bruce, who’s coming to you?

I mean, who wants to rent right now?

What, what’s the demo?

What’s the, the average customer man, woman, young old income level.

What can you tell us?

That’s a great question.

Our average tenant is in their thirties to forties.

They have two kids and the average income of our tenant is 100 and $26,000 a year.

And when we started the company, people rented out of necessity, they didn’t have choices.

Now, many people are renting out of choice.

They like the lock and leave lifestyle.

They like the ability to call the landlord.

You know, if the roof leaks or there’s, there’s some problem.

Plus we have brand new.

So people have a tendency of staying longer and those people have two or three kids.

They can’t live in an apartment in the city.

They don’t want to share walls, they don’t want to have two bedrooms, they want a four bedroom in the suburbs with a backyard and a garage.

That’s what we are offering them.

So, four bedroom in the suburbs in terms of regions in the US where, where are you seeing increased demand and what areas are still pretty sticky when it comes to those high rent prices?

Yeah, you have the smile, which is basically the down through Texas and up through Arizona and uh and that area and that’s where a lot of your migration is.

So we’re seeing a lot of activity there.

We have new entrees coming.

Uh California seems like they’re all moving to, uh uh to Nashville, to Texas.

So we just see a greater demand and greater demand and the supply, you know, quite frankly, isn’t growing a lot because a lot of people in our industry have not been able to expand uh their, their houses and their holdings because of the cost of capital and, and debt to grow our businesses.


I’m just interested for your business, how, you know, pushing into the back half of this year, but also, you know, 2025 and, and far out Bruce, how, how do you think about your business sort of just changing and evolving from here?

What are next steps?

Well, I, I see our business unfortunately going to a smaller houses, you know, uh you look at all these cities, they don’t, they, they, it’s tough to get the uh density approved, but people are trying to get the density builders, developers like us to get enough, uh enough houses on an acre to make it affordable to people.

In the past.

We’ve offered four and five bedroom houses.

I see the rental market going more towards smaller three bedrooms, townhouses, somewhere between an apartment and a house, almost like a hybrid three bedroom, one car garage.

It’s better than living in an apartment.

It’s just not quite as good as living in a large house.

And Bruce when you look into your crystal ball here, what do you think is going to be the catalyst to revive this market?

Is it dependent on if the fed cuts rates and the impact that could have on mortgage rates, is it dependent on a new supply coming in the market?

What, what are you watching as a, as a catalyst here?

We’re, we’re seeing more and more vacancies in the multifamily uh area.

Uh Nashville, you have 15% vacant uh units, uh other cities but then you of the single family rental houses uh vacant.

And so I really see a migration of the gen X but also the millennials moving from the urban core condos apartments and they’re moving 30 miles, 30 minutes outside to the suburbs where you can get a backyard where you can get parks and recreation.

Uh be close to interstates, be close to shopping, that’s where the migration is and you’re not gonna see that changing.

I would not wanna be in the multi family business and there’s a lot of multi family operators coming into the single family rental business.


Really interesting discussion.

Thank you so much for joining us today.

Appreciate it.

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