Investor Activity Drives Single-Family Rentalโค Market, Reaching 5-Year High
Despite headlines often focusing on large institutional investors, the single-family rental market is overwhelminglyโ shaped by smaller players. โindividuals โowning ten or fewer properties โขcomprise over โ90% of all investor-owned homes, while those holding 1,000 or more represent โขa โmere 2% of the total.
Recent trends indicate aโ shift in strategy among these larger institutions. For six โconsecutive quarters, they have been selling more homes โคthan they are purchasing, according to analysis from parcl Labs. Companies like Invitation โขHomes, Progress โขResidential, and FirstKey Homes โฃall reported higher sales volume โthan purchases in the third quarter of this year.
However, this doesn’t signalโ a complete retreat. These institutions are redirecting โขcapital towards build-to-rent communities. This shift is expected to lessen competition for both small investors andโข conventional โคhomebuyers, while concurrently increasing the supply ofโฃ rental properties – a crucial factor in a marketโ where affordability challenges are pushing younger adults towards renting.
“They’re not exiting โthe space, just diverting capital into build-to-rent communities,” explainsโฃ Rick Sharga, founderโ and CEO of CJ Patrick Co. “Butโข this shift means less competition for small investors and traditional homebuyers, while also adding more rentalโฃ supply, which is needed in today’s market where younger adults often โopt to rent since they can’tโฃ afford to buy a home.”
Geographically, Texas, California, and Florida hold the largest number of investor-owned homes,โค correlating with their status as the most populousโข states. Conversely,Hawaii,Alaska,Montana,and Maine exhibit the highest percentage of investor-owned properties,likely due to their โขstrong tourism industries.
Investors consistently target lower-priced homes to maximize potential resale profits. Inโ the second quarter of this year,investors paid an average โขof $455,481 perโ home,below the national average of $512,800 (according to a CJ Patrick report). This was the highest average investor purchase price in six quarters, reflecting the broader increase in home prices.
Large investors specifically โfocused on even more affordable properties, with an average purchase price of $279,889 and an average sale price of $334,787. โคTheirโ activity is concentrated in the โคMidwest โandโฃ South, regions where housing costsโ remain below the national average.
