America's largest landlords have changed course as the highest interest rate increases in decades to squash rising inflation has slowed down acquisitions of single-family homes.
KKR & Co.'s My Community Homes, American Homes 4 Rent, and Amherst Holdings have reduced home buying in recent weeks, according to Bloomberg, citing people familiar with the efforts.
The people, who asked not to be named, said some institutional buyers slashed buying activity by more than 50%.
Mynd Management, a real estate platform that helps investors find, buy, lease, manage, and sell residential investment properties, has advised institutional clients to dial back acquisitions and wait for housing prices to readjust to the interest rate shock.
In an interview, Mynd's CEO Doug Brien told Bloomberg that market conditions could improve in the fall as "buying opportunities" emerge. He said, for the time being, "let's tap the brakes and watch the markets."
Brien's 'wait and see approach' comes as the Biden admin's intention to crush the housing market (with the help of the Federal Reserve's rate hikes) and spark a powerful recession to combat the highest inflation in forty years.
Home sales have been rapidly slowing as 30Y mortgage rates jumped in the year's first half, spiking at the fastest pace on record and unleashing a housing affordability crisis, curbing demand.
... setting the stage for a sharp repricing lower in home prices, hence why Brien has told institutional clients to pause buying due to the risk of overpaying.
Industry executives say the recent slowdown has not dampened their enthusiasm for single-family rentals, and many expect the housing market to offer better opportunities in the months ahead. Those could come in the form of lower home prices, rising rents, or an increased willingness by homebuilders to sell properties in bulk. -Bloomberg
Institutional homebuyers are already preparing for the price slide (we point out this slide already started). NexPoint Advisors raised $2.5 billion for a new single-family rental fund in June.
"When there's no certainty in the market, everybody pauses," said Mike McMullen. He runs Prominence Homes, a Birmingham, Alabama, home builder specializing in rental houses and a real estate brokerage that helps investors acquire properties.
So if institutional buyers have paused buying and millions of Americans can no longer afford homes, how far do prices fall until a buyer remerges?