As the real estate market continues to break records, a cabal of institutional investors has been tossing gasoline on the fire - buying up properties hand-over-fist as middle-American renters watch their dreams of home ownership fade at the hands of pension funds and other financial behemoths.
"You now have permanent capital competing with a young couple trying to buy a house," according to real estate consultant John Burns, whose firm estimates that in many of the country's hottest markets, roughly one 20% of homes sold are bought by someone who never moves in.
"That's going to make U.S. housing permanently more expensive," said Burns, who thinks home prices will climb as much as 12% this year, on top of last year's 11% rise.
"Limited housing supply, low rates, a global reach for yield, and what we're calling the institutionalization of real-estate investors has set the stage for another speculative investor-driven home price bubble," his firm concluded - finding Houston to be a favorite location for investors, who have accounted for 24% of home purchases in the area.
The coronavirus pandemic sparked a race for home-office space and yards. Occupancy rates reached records and rents are rising with home prices. The ecosystem of companies that service, finance and mimic the mega landlords is booming.
Burns counted more than 200 companies and investment firms in the house hunt: computer-assisted flipper Opendoor Technologies Inc., money managers including J.P. Morgan Asset Management and BlackRock Inc., platforms such as Fundrise and Roofstock that buy and arrange for the management of rentals on behalf of individuals and builder LGI Homes Inc., which now reports wholesale home sales to bulk buyers in its quarterly results. -WSJ