The Blubber

As the housing market in the United States displays signs of cooling after a prolonged period of rapid growth, there is a distinct group that might actually welcome a downturn.

Following the aftermath of the 2008 financial crisis, corporations and institutional investors sought to increase their acquisitions of residential real estate, including single-family rentals (SFRs).

However, concerns are emerging that history could repeat itself. According to a report from MetLife Investment Management in 2022, within a span of just seven years, up to 40% of single-family rental homes could be owned and controlled by Wall Street entities.

This situation could potentially present challenges not only for regular renters but also for the broader economy. Let's take a closer look at this phenomenon.

Wall Street's Interest in Neighborhood Purchases After the 2008 financial crisis, home prices plummeted while the central bank lowered interest rates to stimulate the economy. This created an environment where Wall Street gained access to affordable capital and distressed assets.

Over the past decade, interest rates remained lower than the rental yield on many properties. This dynamic made the business model of corporate landlords profitable. Private-equity-backed companies like Blackstone and Pretium Partners acquired hundreds of thousands of homes.

Institutional players such as Tricon Residential, Progress Residential, American Homes 4 Rent, and Invitation Homes amassed substantial portfolios of rental properties across the nation. They currently own around 700,000 SFRs, which represents approximately 5% of the market's total inventory, as outlined in the MetLife report.

Considering the recent surge in inflation and the Federal Reserve's response of raising interest rates, regular homeowners might find themselves compelled to sell their properties due to ongoing financial pressures. MetLife's analysis suggests that institutional investors will likely step in to purchase the newly available homes, as well as those that will be constructed in the years ahead. This could lead to Wall Street-backed investment firms gaining control of a substantial 7.6 million SFRs, equivalent to 40% of the market, by the year 2030.