During the crash of the U.S. housing market, large institutional investors made the most of the crisis by snapping up distressed single family homes. While the supply of foreclosed properties has already declined, investors are still eyeing the housing market. This time, these investors are focusing on single family rental homes.
The U.S. housing market is experiencing an upsurge of rent growth, as well as an increase in the number of single family home rentals, reports CNBC. In a study conducted by Moody's Analytics, chief economist Mark Zandi wrote, "Prospects for the single-family rental market through the remainder of the decade are good. Rent growth is expected to accelerate this year, and average nearly 3 percent per annum though the end of the decade."
Before the housing crisis, single family homes made up 9 percent of the U.S. housing market. Now, it is up to 13 percent and rising, stated Moody's. According to John Burns Real Estate Consulting (JBRC), since 2006, the number of single family homes increased 35 percent, from $11.2 million to $15.1 million. David Guarino, senior research analyst at JBRC, also mentioned that while there are expectations for the growth of single family rentals to slow as foreclosures slow, there is a "huge opportunity to build an investment-quality income stream" from this market.
Meanwhile, Dan Ganguly, CEO of HomeUnion, a California-based residential investment firm said that the opportunity to buy cheap properties in bulk and flipping them for a profit "has probably gone," reports the Dallas Morning News. Ganguly further added that the decline in foreclosed properties resulted to a reduced buying activity of major properties investors. During a gathering of the National Association of Real Estate Editors in Miami, the HomeUnion CEO also shared that the declining trend in homeownership is advantageous for the residential property investment market.
CNBC further reports that investors are well aware of the trends in the single home rental market. Institutional investors have invested $25 billion into the single-family rental market, in the form of 150,000 properties, according to last year's report by Keefe, Bruyette & Woods. The seven largest single-family rental REITs own nearly 150,000 homes and are continuing to buy about 10,000 per quarter, reports Moody's.
