You may have heard the complaints for years. Big Wall Street companies were buying up single-family homes by the thousands, paying cash, and turning them into rentals. Regular buyers, including plenty of folks our age looking to downsize or help a grandchild get started, were getting squeezed out.
Something just changed.
New housing legislation now bars large institutional investors from buying any more single-family rental homes. And those same big landlords are responding by listing more homes for sale.
How Big Is the Sell-Off?
According to real estate data provider Parcl Labs, the number of investor-owned homes listed for sale has more than doubled since early February. On February 1, institutional investors had about 4,166 homes on the market. That number has jumped to 9,447 homes, with a total asking price of $3.1 billion.
Jason Lewris, co-founder of Parcl Labs, put it plainly. “The rate of for-sale change is something to keep an eye on,” he said. “These numbers won’t materialize into actual dispositions for months given how long the sales cycle can be, but it’s the fastest read into institutional behavior.”
The biggest names in the rental home business, Progress Residential, Invitation Homes, AMH, Tricon, FirstKey, Amherst, and VineBrook, have all sold more homes than they have bought so far this year. Combined, they have sold 3,180 more homes than they purchased since January 1.
Who Counts as an Institutional Investor?
The new law defines institutional investors as those owning 350 or more homes. That caught the industry off guard; the industry had traditionally set that threshold at 1,000 homes.
The investors covered by the law own roughly 589,000 homes, or about 3.9% of the 14 million single-family rental homes in the United States, according to Parcl. The law does not force them to sell homes they already own, but they cannot buy more, with a few exceptions, including homes built specifically for rent.
Lawmakers on both sides of the aisle supported the ban. Their argument was that these investors, most of whom could afford to pay full cash for homes, were driving up prices and pushing out regular buyers.
One Company Is Selling Fast
While most of the big players are selling gradually, one stands out. VineBrook currently has nearly 10% of its entire portfolio on the market; roughly 1,900 homes with a total asking price of $285 million.
By comparison, the two publicly traded rental home companies, Invitation Homes and AMH, have 549 and 536 homes for sale, respectively. The largest landlord in the group, Progress Residential, has the fewest listings of the major players, with just 143 homes on the market.
Are They Offering Deals?
If you are in the market to buy, there is something worth noting. Nationally, about 38.7% of all homes listed for sale right now have had price cuts. But among the institutional investor listings, that number is 54%. Since early May, their average markdown has deepened from about 3.1% to 4% of asking price.
Lewris noted that some of this reflects a deliberate strategy, selling off underperforming properties and redirecting that money toward building new rental homes, which is still allowed under the new law.
What Comes Next
The big landlords are not going away. They are simply shifting their focus. AMH began building its own rental homes back in 2017 and has since developed more than 14,000 homes across 180 communities. Invitation Homes purchased an Atlanta-based homebuilder called ResiBuilt earlier this year.
Stephen Scherr, co-president of Pretium, the parent company of Progress Residential, described the path forward in a recent CNBC interview. “We can buy build-to-rent, which is a predominant component of new housing. We can buy under various other exceptions including rent-to-renovate, where we improve the housing stock, or we buy under a homeownership boost, where we give people an opportunity to transition where they want from renters to owners,” he said.
Chris Nebenzahl, vice president of rental research at John Burns Research and Consulting, sees the financing climate improving. “The financing case has materially changed with the forced disposition mandate removed. Lenders can underwrite build-to-rent again, and we’re starting to see this happen,” he wrote in a recent report.
For anyone watching the housing market, whether you are thinking about buying, helping family members buy, or simply curious about what is happening to home values in your area, the next few months will be worth watching closely.
