Investors Hold Out for Larger Gains

July 7, 2015

With the rental market still strong, large institutional investors are holding onto one of their most valuable assets: Single-family rental homes.

In the aftermath of the housing crisis, investors swarmed to buy up foreclosed single-family homes and turn them into rentals. Now, even years later, they're refusing to let go and sell, viewing long-lasting potential with these properties. 

"Prospects for the single-family rental market through the remainder of the decade are good," notes Mark Zandi, chief economist of Moody's Analytics, in a recent study. "Rent growth is expected to accelerate this year, and average nearly 3 percent per annum though the end of the decade."

The share of single-family rental homes has climbed 35 percent since 2006 -- reaching 15.1 million from 11.2 million, according to John Burns Real Estate Consulting. About 3.9 million owner-occupied homes have turned into rentals since that time compared to 2.9 million newly built apartment units. 

"While we expect the rate of single-family rental growth to slow as foreclosures slow, we believe the professional operators have a huge opportunity to build an investment-quality income stream out of what used to primarily be a mom and pop business," notes David Guarino, senior research analyst at John Burns Real Estate Consulting. 

Source: "Big Investors Buy Fewer Homes But See Bigger Gains," CNBC (July 6, 2015)