Build-to-Rent Investors Buying Home Inventory, Driving Up Prices
New York, NY, April 5, 2021-Investors are buying homes to use as rental units, driving up home prices and snatching up inventory in an already tight market, according to the Wall Street Journal.
“A bidding war broke out this winter at a new subdivision north of Houston. But the prize this time was the entire subdivision, not just a single suburban house, illustrating the rise of big investors as a potent new force in the U.S. housing market.
“D.R. Horton Inc. built 124 houses in Conroe, Texas, rented them out and then put the whole community, Amber Pines at Fosters Ridge, on the block. A Who’s Who of investors and home-rental firms flocked to the December sale. The winning $32 million bid came from an online property-investing platform, Fundrise LLC, which manages more than $1 billion on behalf of about 150,000 individuals.
“The country’s most prolific home builder booked roughly twice what it typically makes selling houses to the middle class-an encouraging debut in the business of selling entire neighborhoods to investors.
“‘We certainly wouldn’t expect every single-family community we sell to sell at a 50% gross margin,’ the builder’s finance chief, Bill Wheat, said at a recent investor conference.
“From individuals with smartphones and a few thousand dollars to pensions and private-equity firms with billions, yield-chasing investors are snapping up single-family houses to rent out or flip. They are competing for houses with ordinary Americans, who are armed with the cheapest mortgage financing ever, and driving up home prices.
“‘You now have permanent capital competing with a young couple trying to buy a house,’ said John Burns, whose eponymous real estate consulting firm estimates that in many of the nation’s top markets, roughly one in every five houses sold is bought by someone who never moves in. ‘That’s going to make U.S. housing permanently more expensive,’ he said.”