It’s a good time to be a large investor renting out single-family homes, but it’s hard to expand. They face the same problem homebuyers do: Low inventory.
NEW YORK – High borrowing costs and a shortage of properties for sale have slowed home buying by “mega-landlords,” limiting their ability to grow at the same time suburban rents are increasing.
Selling prices keep rising due to fierce competition from individual homebuyers, who are willing to bid up the few homes hitting the market. As a result, big landlords can’t pay the current prices and still meet profit targets.
Landlords with 1,000 properties or more accounted for 0.4% of U.S. home purchases during the second quarter, down from a peak of 2.4% in late 2021, according to John Burns Research & Consulting.
Analysts say that sidelined landlords are a sign that the Federal Reserve might be closing in on the interest-rate number needed to shift the housing market down from overdrive and slow the heightened spending that accompanies growing property values.
Invitation Homes, which owns approximately 83,000 houses, has been selling properties that have appreciated to the point that they’re yielding less than 4%. They’re then putting the proceeds in the bank, where the cash is earning more than 5% that, executives say, they’ll spend when more motivated sellers start listing their homes.
AMH, owner of about 59,000 houses, was also a net seller during the first half of 2023. It sold nearly 1,100 while adding 780, mostly built-in houses.
Renting single-family homes has become much less expensive than financing purchases in the markets where the big landlords operate, says Rick Palacios of John Burns Research & Consulting.
Source: Wall Street Journal (09/20/23) December, Ryan
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