The Small Balance Intersection Update - December 23, 2024

Slow Growth Ahead

U.S. Single-Family Rent Growth Cools in October

Annual U.S. single-family rent growth slowed to 1.7% in October 2024, marking its lowest level since June 2020 and down from 2.3% in October 2023. This deceleration reflects broader cooling in rental demand as pandemic-driven population shifts stabilize, particularly in high-growth markets of the South and West. Monthly rent growth also fell below historical norms, with a -1.5% decline compared to the average -0.5% for October from 2004-2019. Notably, rent growth in previously tepid metros like Detroit (6%) and Washington, D.C. (4.5%) outpaced national averages, while Austin saw the steepest annual decline at -3%.

The breakdown of rent performance shows a mixed market dynamic. High-end rent prices rose by 2.4% year-over-year, up from 1.8% in 2023, while low-end rents climbed 2.0%, significantly slower than the 3.0% rate last year. Some previously booming markets, such as Austin and Phoenix, have seen rental prices retreat, with Austin rents down 3% but still up 22% since February 2020. This marks the third consecutive month of below-trend seasonal growth, signaling that the era of surging rents is conclusively behind us. With ongoing normalization, national rent trends are expected to stabilize further into 2025.

🔗 Read the full report here

Opportunity Lane – Next Exit

Single-Family Rental Investment Trends

The single-family rental (SFR) sector is thriving, with construction starts hitting a record 9% of all single-family development activity. Homeownership affordability challenges, fueled by mortgage rates nearing 7% and record-high home prices, have driven more households toward SFRs. This trend aligns with surging demand for suburban amenities without the financial burden of ownership.

SFR capital markets are robust, with CMBS issuance soaring 145% year-over-year to $6.8 billion through Q3 2024. Rent growth remains steady at 4.4% annually, matching pre-pandemic rates, with cities like St. Louis (+7%) and Indianapolis (+6.6%) leading the pack. Build-to-Rent (BTR) developments are booming, now comprising 9% of all single-family starts—a new milestone.

Debt yields stabilized in Q3 at 10.8%, while cap rates declined slightly to 6.7%. Although occupancy and retention rates have dipped, delinquency levels remain historically low, reflecting the sector's resilience. Valuations are rising modestly, with the average single-family home valued at $358,695, up 2.8% annually.

With favorable cap rates, steady rent growth, and expanding BTR projects, SFR’s growth trajectory remains solid. As housing affordability remains constrained, SFR is poised to play a pivotal role in addressing the U.S. housing demand in 2025 and beyond.

🔗 Read the full Arbor report here

Caution: Rebuilding Zone Ahead

American Relief Act Paves the Way for SBA Disaster Recovery Funding

President Joe Biden signed the American Relief Act, 2025 into law, securing funding for the U.S. Small Business Administration’s (SBA) Disaster Loan Program to aid recovery from natural disasters. This funding enables the SBA to resume processing financial relief applications from over 21,000 individuals and businesses affected by Hurricanes Milton, Helene, and over 200 other federally declared disasters. The program provides low-interest, long-term loans to fill market gaps and support rebuilding efforts.

The program had been on hold since October 2024 due to exhausted funding, though applications continued to be accepted. Loan offer details will begin reaching eligible recipients within 48 hours, addressing a backlog caused by the funding lapse. SBA Administrator Isabel Guzman highlighted the program's essential role in community recovery, emphasizing the immediate deployment of resources to support economic stability. The SBA also continues to accept new applications for recent disasters, encouraging affected individuals and businesses to apply online.

This action reflects the administration's commitment to economic recovery and resilience in disaster-stricken communities. For more information, visit the full report.

Reduce Speed: Legal Action in Progress

Header: Kabbage Executives Face Federal False Claims Act Allegations

The United States has filed a complaint against former executives of Kabbage Inc., alleging violations of the False Claims Act related to the Paycheck Protection Program (PPP). The lawsuit accuses the executives of submitting false claims for loan guarantees, forgiveness, and processing fees by inflating payroll costs and failing to implement adequate fraud controls. Kabbage approved over $7 billion in PPP loans during 2020, earning $217 million in processing fees, but allegedly ignored key compliance requirements to maximize profits before selling its assets later that year.

The claims detail systemic errors, including double-counting payroll taxes and inflating compensation figures, leading to improper loan amounts. The U.S. government has taken a strong stance against misuse of pandemic relief funds, emphasizing accountability for lenders and executives who shirked responsibilities. The lawsuit was initiated under the whistleblower provisions of the False Claims Act, with the United States joining the case. Kabbage, now operating as KServicing Wind Down Corp., previously settled related allegations with a claim of up to $120 million in bankruptcy proceedings.

This case highlights ongoing efforts by the Department of Justice’s COVID-19 Fraud Enforcement Task Force to address fraudulent activities related to pandemic relief programs. Officials reaffirm their commitment to investigating misuse and ensuring funds are used appropriately. For more details, visit the full report.