Blackstone Group LP is slowing its purchases of houses to rent amid soaring prices after a buying binge made it the biggest U.S. single-family home landlord.
Blackstone’s acquisition pace has declined 70 percent from its peak last year, when the private equity firm was spending more than $100 million a week on properties, said Jonathan Gray, global head of real estate for the New York-based firm. After investing $8 billion since April 2012 to buy 43,000 homes in 14 cities, the company has narrowed most of its purchasing to Seattle, Atlanta, Miami, Orlando and Tampa.
“The institutional wave has passed,” Gray, who oversees almost $80 billion in property investments, said in a telephone interview. “It’s at a much lower level than it was 12 or 24 months ago.”
Private-equity firms, hedge funds, real estate investment trusts and other institutional investors have spent more than $20 billion to buy as many as 200,000 rental homes in the last two years. They snapped up properties after prices fell as much as 35 percent from the 2006 peak and rental demand rose from the almost 5 million owners who went through foreclosure since 2008. President Barack Obama credited the investors for helping put a floor under the plunging housing market and consumer advocates such as the National Community Reinvestment Coalition later blamed them for soaring prices in some cities.
Foreclosures Fall
American Homes 4 Rent and Colony American Homes, the second- and third-largest single-family landlords, also have been scaling back as bargains dry up. Home prices have risen 24 percent since a post-bubble low in March 2012, which was about when corporate buyers started their buying spree, according to the S&P/Case-Shiller index. The rate of U.S. foreclosure starts fell to its lowest level in eight years in the fourth quarter as higher prices allowed more delinquent homeowners to sell without taking a loss, according to the Mortgage Bankers Association.
Jade Rahmani, an analyst for Keefe, Bruyette & Woods Inc., said large investors are focusing on fewer locations as they gain experience and prices go up.
“Home prices have increased, which narrows the acquisition opportunity,” Rahmani said. “In addition, these companies have done this for a certain amount of time and there are lessons learned.”
While institutional purchases nationwide fell to a 22-month low in January, corporate investors were more active in the Atlanta region, buying 25 percent of homes sold, according to data firm RealtyTrac. That helped drive up Atlanta prices 37 percent since the March 2012 trough.
Outbidding Homebuyers