Category: Market Information
American Homes 4 Rent MegaCorp Selling home they've rented for years. Sign of things to come?
PROPERTY TAXES
Hello everyone, Kyle Sasser here from the Ashlar Home Team.
Today, I stumbled upon something intriguing in the MLS that I believe will pique your interest.
There’s been a lot of buzz about large-scale home investment buyers, and while it might seem like a recent phenomenon, these hedge funds and private equity firms have actually been active in the housing market for quite some time.
However, I found something super interesting that may indicate a shift for these Mega Landlords.
WATCH THE EPISODE!
This hedge fund guy told me they are buying up everything they can because there's no downside and will never be a downturn in the market.
Rise of Large Scale Landlords?
Large-scale corporate or hedge fund ownership of homes isn’t a new trend.
Companies like Invitation Homes and American Homes 4 Rent, which own tens of thousands of properties, went on highly publicized buying sprees from around 2018- 2022.
The media has been filled with stories about these companies, often painting a picture of doom and gloom. However, understanding how these large corporations interact with the real estate market can offer valuable insights.
A Single Home in Land O' Lakes
I want to share a specific example of a home currently for sale in Land O’ Lakes, Florida. This property, originally built by Lennar in 2005, was purchased for $344,900.
I had a client express interest in a property, and my process involves thoroughly examining the listing, the neighborhood, and public records for sales data and history.
What I discovered is that the home had been owned by the same person from 2005 until it was sold in 2019. This indicates that it’s not a quick flip but rather a well-maintained property.
However what really caught my attention was that this home is owned by AH4R Properties Two LLC, which upon further investigation, is linked to American Homes 4 Rent—a major player in the rental home market.
Understanding The Scale Motivations
American Homes 4 Rent owns around 52,000 homes across 22 states and holds assets worth approximately $9.1 billion. They are a pretty significant player and one of the first in this segment.
It’s important to note that these large scale landlords do own what looks to be monumental numbers of single family homes, and truth be told it doesn’t sit well with me that they do, but they still only own a miniscule fraction of the market. By and large, individual people are by far the largest single family home owners.
But still, a company buying up entire neighborhoods of single family homes is newsworthy.
But these companies being businesses are primarily concerned about…. PROFIT.
These large scale home buyers went on a bit of an aquisition binge from around 2018 – 2022. Money was super cheap, interest rates were low and went lower, and investment money flowed in waterfall proportions.
It Made My Hair Stand On End!
However, I spoke with someone around 2021 who worked with a large REIT (not American Homes 4 Rent it should be noted) and they basically told me they are buying up everything they can because there’s no downside and will never be a downturn in the market.
Whenever says something with that amount of hubris it should always get your attention.
Anyone saying that Real Estate is either lying through their teeth or ignoring centuries of history.
So what you have is a situation where “You’re stupid if you’re not buying everything you can” well that’s a sure fire recipe for overextending yourself.
As The Real Estate Market Turns
It is inevitable that the Real Estate market will change. Even years from 2024 when I’m writing this, when the market has shifted 2-4 times… it will change again in the future.
And it happened here as well.
Everyone looks brilliant buying rental homes when rents are constantly increasing. But that can only last for so long. What’s going to happen when there’s a lot more rental homes at prices renters aren’t willing to pay?
That’s called OverSupply, and it’s a textbook part of any market cycle. Demand decreases, supply jumps up, and prices start to decline.
So currently (7/2024) there’s a TON of homes for renta and monthly rent in many parts of the country are significantly lower than they were a few years ago.
And at some point, these investment homes are not going to look as attractive an investment as they did in 2021 and 2022 when rent was going up hundreds of dollars per year.
And So They Will Likely Sell Them
This particular home in Land O’ Lakes is one of the first retail sales I’ve noticed from a large-scale investor like American Homes 4 Rent.
To me it indicates that they are making a shift in their home ownership portfolio. More of these properties might be put up for sale if returns continue to decline and interest in REIT investment declines. AI, afterall, is the new hotness for investment money!
The fun part is the incentives are likely to be the reverse if we do start to see large scale sales. After all, the decision makers didn’t mind overspending to buy homes. So they won’t be overly worried
Closing Thoughts...
If we do start to see more and more REITs selling their homes retail, that additional supply will only help to boost the inventory of homes for sale.
Would it be enough to drop home prices?
If they put every home up for sale in just a few months absolutely, but that’s not usually how these things go. And remember, all of their homes are not empty… many have tenants in place.
The additional thing to point out is that this home is being sold retail on the MLS.
That’s pretty unusual! Usually when large scale home owners sell homes, they do it as a package or portfolio. Selling 5-10 homes is one thing. Managing say 1,000 homes for sale at any point in time is another level entirely. There’s probably still buyers for large portfolios out there, but if rents continue to decline that will likely change.
Thank you for tuning in. If you have any thoughts or questions, please leave a comment below. And if you need assistance with your own home search, feel free to reach out below.
Thank you so much for joining me today. My name is Kyle Sasser, and I’ll talk to you soon!
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