Amherst Capital Management released a new paper on Tuesday titled, “U.S. Single-Family Rental—Institutional Activity in 2016/2017,” revealing that institutional ownership of single-family rental (SFR) homes surpassed 200,000 homes in 2016.
As investors continue to capture a growing share of the expanding SFR market, the data reveals that the biggest takeaway is that total institutional investment in SFR homes reached $33 billion at the end of 2016.
While $33 billion is a “big leap” for an asset class that has little institutional involvement until six to seven years ago, the paper notes that this represents only a “teensy drop in the bucket compared to the total value of single family homes which we estimate at about $26 trillion. Even among the 15 million or so single-family rentals, institutions own less than 2 percent.”
According to Sandeep Bordia, Head of Research and Analytics at Amherst Capital, as institutional activity in the SFR market continues to increase, it is driven by relatively attractive valuations, modestly strong home price appreciation, and stable financing.
“Our data shows that newer entrants and mid-sized institutions accounted for the majority of institutional SFR home purchases over the last year, compared to a slowdown in buying activity among larger institutional holders,” said Bordia. “We believe that evolving demographics, financial factors and shifting consumer preferences, will keep demand for SFR homes elevated over the coming years.”
Amherst Capital describes several notable shifts occurring in the SFR space, including, including, “newer entrants and mid-sized institutions have increased market share of institution-owned SFR homes, compared to a buying slowdown among larger institutions and institutional SFR buying shifted geographically to the Southeast and Midwest U.S., away from Western markets prioritized by early SFR entrants.”
In addition, the paper notes that recent institutional SFR activity demonstrates that the demand for SFR homes will remain strong.
To view the full paper, click here.