• 13 mins Ontario Moves To Slow Cannabis Drive
  • 2 hours The Tech That Will Shape The Future Of Megaprojects
  • 4 hours What Role Will The Saudis Play In Tesla's Private Listing?
  • 20 hours Investors Flee Emerging Markets Amid Lira Crisis
  • 21 hours Startup Aims To Attract Young Renters With Savvy Tech
  • 22 hours The Last Frontier For Artificial Intelligence
  • 23 hours EU Companies Struggle To Pick Sides In U.S.-Iran Dispute
  • 1 day Turkey’s Currency Crisis Raises Fears Of Contagion
  • 1 day Could Gold Fall Below $1,000?
  • 1 day Markets Open Higher Despite Ongoing Turkish Crisis
  • 2 days Why Gold Investors Should Ignore The Swings
  • 3 days Stock Buybacks Poised To Eclipse $1 Trillion
  • 4 days Google Accepts Chinese Censorship For Big Payout
  • 4 days Baltics Want to Pull The Plug On Russian Power
  • 4 days Gold Demand In Iran Hits Record Levels
  • 4 days Ride-Sharing: The Next Hotbed For Cybercrime?
  • 4 days Turkey’s Currency Crisis Sends Shockwaves Through Global Markets
  • 4 days Why Rising Inflation Won’t Help Gold Prices This Time
  • 5 days Emerging Markets Hit Hard By Fed’s Trillion Dollar Experiment
  • 5 days What Is Vanadium And Why Did Its Price Just Skyrocket?
Trade War With EU Temporarily Averted

Trade War With EU Temporarily Averted

As of midday trading on…

Housing Sales Are Slowing As Buyers Get Priced Out

Housing Sales Are Slowing As Buyers Get Priced Out

Rising mortgage rates and higher…

Alex Kimani

Alex Kimani

Writer, Divergente Research LLC

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Divergente Research LLC and Safehaven.com. 

Contact Author

  1. Home
  2. Markets
  3. Economy

The Real Winners Of The Real Estate Business

WS

America has become a renter nation, and Wall Street is loving it.

More households are renting than at any point in 50 years, thanks mostly to the cataclysmic housing bust of a decade ago. Nearly 37 percent of households now rent compared to 31 percent in 2006, while home ownership has remained relatively flat. You would need to go back to 1965 to find a time when home rentals were that high.

Meanwhile, Wall Street is confident that this trend will persist, with financiers who loaded up on homes at pennies to the dollar at the height of the crisis now rushing to buy even more despite home prices being at all-time highs. And they are not your typical home investors-- sovereign-wealth funds, hedge funds, insurance companies, pensions and asset managers are all piling in for a piece of the action.

Investors purchased 29,000 homes in 2017, a massive 60 percent increase compared to the previous year according to real estate investment firm, Amherst Capital Management LLC. That also marked the first time in five years that investors purchased a disproportionately large number of homes in a single year.

Cashing In On the Rentals Boom

Large investors looking to profit from the home rentals boom are increasingly targeting wealthier tenants by securing single-family homes instead of apartments in places like Phoenix, Atlanta, and other fast-growing metros. Related: How Corporate America Is Filling The Gaps In Public Education

This demographic tends to have a couple of children and need more bedroom and living spaces than typical apartments can offer. They are also likely to be more willing to stick in one place and weather rental increases as long as it’s in a good school district.

Further, the economics favor single-homes over apartments--apartment numbers have risen significantly over the past couple of years thus driving down rental yields.

Pretium Partners LLC, an investment firm, has announced that it has raised $1 billion to add 26,000 rental units to its portfolio.

In markets where housing inventories cannot meet demand, investors are building new homes.

South Florida-based Transcendent Investment Management LLC has secured $250 million to build thousands of rental homes in Southeast Florida.

According to real estate data firm, ATTOM Data Solutions, rental home investments are growing fastest in Green Bay, Wisconsin; Sevierville, Tennessee; Anchorage, Alaska; Myrtle Beach, South Carolina; Syracuse, New York and Charleston, West Virginia.

Renting Is The New Norm

The reason why more Americans are preferring to rent than buy is pretty straightforward—most (64 percent) live in counties where renting takes up a smaller portion of their paychecks compared to buying. Yet the funny thing is that the median home price is actually cheaper than renting in 240 of 447 U.S. counties.

So why the contradiction?

Related: Netflix Shock Hits FAANG Stocks Hard

It’s all about getting the best bang for your buck. With a strong jobs market, people want to stay mobile since most cannot afford houses near urban centers where they are likely to get higher-wage jobs.

Further, the  Republican tax bill has complicated the whole buying vs. renting calculus. Under the 2017 tax code, a three-member household with annual income of $150,000 would be better off buying if monthly rent exceeded $1,507.

Under the new tax code, however, the same family would have to be doling out $1,885 per month in house rent to make buying worthwhile. With the national average rent currently around $1,405 and growing at a fast but manageable clip of three percent per annum, it will take a couple of years before the math begins to favor home buying once again.

By Alex Kimani for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment