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uilders are facing a glut of unsold homes due to a construction boom and rising mortgage rates that have made it harder for buyers to afford new homes. Despite this, many builders are choosing not to cut prices, instead offering incentives such as mortgage-rate buydowns or smaller floor plans to attract buyers. However, these efforts may not be enough to move inventory quickly.

    Some builders are turning to the rental market as a solution, converting unsold homes into rentals or selling them to investors who specialize in single-family-home rentals. Opportunistic investors, mostly small and midsize players, are happy to oblige, providing an exit option for builders struggling to sell their homes.

    The build-to-rent pipeline has become robust, with large companies like D.R. Horton and Invitation Homes purchasing thousands of homes from builders. These companies represent a new category of buyers that can help builders unload inventory during a downturn.

    However, big companies own only a small fraction of single-family rental homes, and they've been more selective in their purchases due to higher interest rates. Small and midsize investors are now the most active buyers, purchasing 3% to 5% of homes sold by builders in the past three months.

    Builders can also opt for a new long-term loan based on rental income, then find tenants and wait to sell when the market is more favorable. This option may not be ideal, but it could become another valuable off-ramp if they have trouble unloading homes.

    The housing market remains in limbo, with prices and borrowing rates providing no relief for buyers. The number of renter households is growing three times as fast as homeowner households, leaving would-be buyers with nowhere else to turn but the rental market.