Landlords Ready War Chests to Buy in Cooling U.S. Housing Market

Published by Bloomberg | June 13, 2022

Rental companies see potential discounts ahead from homebuilders as higher mortgage rates sideline regular buyers.
Single-family landlords are eyeing opportunities in the slowing U.S. housing market, betting that lower demand from consumers will lead builders to offer discounts.
American Homes 4 Rent, the third-largest single-family landlord, is taking calls daily from a variety of potential sellers, including national builders, Chief Executive Officer David Singelyn said at an industry conference last week. He said builders are currently offering small concessions on deal terms even as they hold the line on price, but he expects that to change.

“We’re going to see those prices come down,” Singelyn said. The landlord is “sitting on a significant amount of investable cash and funds, and we can take advantage of those opportunities.”

The chance for landlords to score deals on new rental homes is shaping up as higher mortgage rates push some would-be buyers to bow out of a frenzied market. Institutional investors discovered single-family rentals a decade ago, in the aftermath of a foreclosure crisis, but few housing observers are predicting a similar crash this time.

Instead, the surge in rates is seen as helping calm the housing mania. Slowing price gains and growing inventory may be good for prospective buyers over the long run. For now, the new conditions are creating risks for homebuilders, who accrue costs when houses take longer to sell. Striking deals with landlords can help builders keep work crews busy and add housing inventory even amid slower consumer demand.

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