The biggest landlords in the US can’t find houses either

Being a large investor in the single-family home rental market currently has its advantages, but expansion poses challenges due to a common issue: a limited inventory.

In the present climate, the combination of high borrowing costs and a shortage of available properties for sale has resulted in a slowdown in home acquisitions by these "mega-landlords." This situation is hindering their ability to expand, particularly as suburban rental rates are on the rise.

The escalating selling prices of homes are a direct result of intense competition from individual homebuyers who are willing to bid up the few homes that come onto the market. Consequently, large-scale landlords are finding it difficult to acquire properties at current prices while still meeting their profit targets.

According to John Burns Research & Consulting, landlords who own 1,000 properties or more accounted for only 0.4% of U.S. home purchases in the second quarter, a significant decline from their peak of 2.4% in late 2021.

Analysts suggest that these sidelined landlords may signal that the Federal Reserve is approaching the interest-rate threshold necessary to cool down the housing market, thereby slowing down the excessive spending that accompanies soaring property values.

Companies like Invitation Homes, with approximately 83,000 houses in their portfolio, have opted to sell properties that have appreciated to the point where they yield less than 4%. They are then reinvesting the proceeds in interest-bearing accounts that generate more than a 5% return. Their intention is to deploy these funds when more motivated sellers decide to list their homes.

Similarly, AMH, which owns about 59,000 houses, has taken the stance of being a net seller during the first half of 2023. They sold nearly 1,100 properties while adding 780, primarily through in-house construction.

In the markets where these major landlords operate, renting single-family homes has become a more cost-effective option compared to financing home purchases, as noted by Rick Palacios from John Burns Research & Consulting.

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