Investors cool home purchasing for single-family rentals

The cooling of the housing market isn’t only affecting prospective homeowners — it’s hampering investors, too.

Several investors are slowing home purchases for single-family rentals due to high home prices and the rising cost of financing, Bloomberg reported. People close to the decisions told the outlet three investors — KKR & Co.’s My Community Homes, American Homes 4 Rent and Amherst Holdings — are among those to slow purchases in recent weeks.

Institutional landlords are hiking yield requirements for new purchases, according to the publication. As a result, some have cut their buying activity by more than 50 percent.

“Let’s tap the brakes and watch the markets,” Mynd Management CEO Doug Brien, whose company advises institutional and retail investors, told the outlet. “There’s a belief that in the fall, buying opportunities will improve.”

Home prices have soared to historic highs, pricing ordinary homebuyers out of the market. Increasing mortgage rates are doing the same, which may result in a correction in the market that could bring down sale prices, which would help investors’ profits on single-family rentals.

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Investors seize record share of home purchases

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Investors consistently scoring with single-family rentals

Investors have a greater ability to pay in cash and avoid the trappings of increased interest rates, but they aren’t immune from the need of financing. In one example, Tricon Residential recently refinanced nearly 1,700 homes at a 5.5 percent interest rate, more than double the rate the company took out for a securitized loan in November.

The reported pullback comes after investors accounted for a record share of home purchases in the first quarter. Redfin reported investors accounted for 20 percent of home purchases across 40 of the country’s major markets in the first quarter, paying $49.8 billion for homes.

Seventy-three percent of investor purchases in the quarter were for single-family homes.

Single-family rentals have been a consistent winner for investors during the pandemic as sustained demand and the short supply of homes have sent some prospective homeowners into the rental market instead. The boom began in 2020 and built-to-rent homes became the fastest-growing housing sector in the nation.

— Holden Walter-Warner