Investors Ready for ‘Bonanza’ in Housing

Deep-pocket investors – notably the mega companies that buy single-family homes and turn them into rentals – expect a rash of foreclosures to start appearing in 2021.

NEW YORK – Single-family landlord giants are expecting a surge in repossessed homes as millions of homeowners have fallen behind on their mortgage payments and may be at risk of losing their homes once eviction moratoriums end.

The Wall Street Journal reports that landlords are waiting for a “potential bonanza” of distressed properties as well as the emergence of a new wave of renters.

About 3.5 million home loans – or 7.01% – were in forbearance as of Sept. 6, according to the Mortgage Bankers Association. About a million more homeowners are behind on their mortgage payments but are not in a forbearance program.

As a result, investors are preparing for a wave of homes to come onto the market. Individuals and investment firms have been buying more than one in every 10 homes sold in the U.S. over the past decade, but that number will likely increase. When foreclosure moratoriums expire at the end of the year, a slew of homes could hit the market, and investors are boosting their funds and getting ready to snatch them up.

“Once January comes, that’s when the carnage will come,” Jared Kessler, chief executive of EasyKnock Inc., told The Wall Street Journal. The startup EasyKnock raised $25 million from investors in June to launch a sale-leaseback program this month.

Single-family rental company giants formed during the housing crisis are betting on growth in the suburban rental class. Investment firms like Blackstone Group Inc., Koch Industries Inc., J.P. Morgan Asset Management, and Brookfield Asset Management Inc. are making investments to expand their single-family rental companies in preparation.

American Homes 4 Rent, which owns about 53,000 houses, is currently focusing on building homes to rent. Its rival, Invitation Homes, has been buying properties at a pre-pandemic pace: about $200 million in homes every three months. Invitation Homes is also preparing a sale-leaseback program as another channel to add to its already 80,000 housing-unit portfolio.

Source: “Millions Are House-Rich But Cash-Poor. Wall Street Landlords Are Ready,” The Wall Street Journal (Sept. 18, 2020) [Log-in required.]

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