The Rise of BIG Investors in US Housing Market

Key Highlights

– Investors now buying entire subdivisions and neighborhoods

– Seller making 25%-50% more by selling entire developments rather than making house-by-house deals

Your Buyer Could Be a Pension Fund

Big investors are making themselves felt in the housing industry a big way these days.  Build-to-rent developments are now selling entire subdivisions and neighborhoods to name-brand investment firms, home-rental firms and pension funds.

Sure, investment groups are continuing to buy individual homes when they become available but now, with interest rates at nearly all-time lows, such investors are chomping at the bit to buy in mass.

One Example in Housto

In late December 2020, an entire build-to-rent subdivision of 124 homes went on the block.  Built by behemoth D.R. Horton Inc., multiple high-profile investment groups presented offers in what turned out to be a very competitive bidding war.

Fundrise LLC, an online property-investment platform that manages +$1B for approximately 150,000 individuals, won this bidding war for $32M

The buyer was happy.  And the selling entity made nearly twice as much as it would have made if the seller had offered the homes for sale one at a time.

Yield-Chasing Investors Hungry for Single-Family Houses to Rent or Flip

John Burns, president of John Burns Real Estate Consulting, said, “You now have permanent capital competing with a young couple trying to buy a house.  That’s going to make US housing permanently more expensive.”

Burns estimates that some one in every five homes now on the market for sale is being snapped up by a buyer who never moves in.  He believes that in boomtowns such as Houston, Phoenix, Miami and Las Vegas, 24% of homes priced below $300,000 in decent school districts are being acquired by investment groups.

Mega Landlords Are Booming

This last spring brought a stampede of mega-buyers into the housing market.  The COVID pandemic had spawned a race for home-office space and yards…with that race, prices for both home sales and single-family rentals exploded.  Likewise, the “ecosystem” of investment firm money and services exploded with it.

Companies such as Opendoor, JP Morgan Asset Management, Black Rock, Fundrise, Roofstock , PCCP LC, Centerbridge Partners LP, Allianz SE, Madison Realty Capital and states’ retirement systems are now flourishing via their investments in for-rent housing.

Josh Zegen, Madison Realty’s managing partner, said, “A lot of things that would have been for-sale housing are going to be for-rent housing.”

Thanks to The Wall Street Journal.

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