Chicago-based Home Partners of America Inc. owns more than 17,000 houses throughout the country, which it rents out to tenants and offers them the option of ultimately buying the home. The deal was reached after a competitive bidding process, and is expected to close in the third quarter of 2021.
Surging demand for homes as a result of the pandemic, as well as many millennials aging into homebuying, has led to one of the hottest markets the real estate industry has ever seen. The investment by Blackstone demonstrates that confidence in the market by Wall Street investors is unlikely to wane anytime soon.
Amid surging demand and supply shortages, home prices have continued to steadily rise over the last year or so, making an investment in real estate a particularly attractive one for institutional investors at this time. On Tuesday, the National Association of Realtors reported that the median price of existing homes hit a new all-time high of $350,300 in May.
Blackstone has a history of keeping its finger on the pulse of the market — the company was one of the major investment firms to purchase large swaths of homes in the wake of the subprime mortgage crisis as large numbers of foreclosed homes were being sold off by lenders. At that time, Blackstone built up its portfolio of single-family homes and rented them out through Invitation Homes, which would become one of the largest single-family rental home companies in the country.
Blackstone then left the single-family rental market once it sold off shares in Invitation Homes in 2019, only to re-enter it in 2020 when it spent $240 million on a preferred equity stake in Tricon Residential Inc., a Toronto-based company that purchases single-family rental homes in North America.
A number of firms have acquired stakes in single-family rental companies recently, the Journal noted. Brookfield Asset Management Inc., a real estate asset management firm, recently acquired a stake in a property management company that owns over 10,000 U.S. homes. Meanwhile, J.P. Morgan Asset Management has invested in American Homes 4 Rent, and Rockpoint Group LLC has invested in single-family rental companies Resicap and Invitation Homes in recent months.
Rents faltered and declined in many metro areas during the pandemic as urban dwellers sought to escape the congestion of cities and obtain more personal space to shelter in place. However, as home prices have continued to creep upwards, more would-be homeowners are being priced out of the for-sale market and forced into the rental market, which has allowed rents to bounce back a bit. In March, national rent growth sped up for the first time in eight months, with median rent rising 1.1 percent in the 50 largest U.S. metro areas to $1,463, according to a Realtor.com report.
That rent data is a good sign for those looking to invest in the rental market now. Blackstone’s acquisition of Home Partners will be done through one of its investment funds, Blackstone Real Estate Income Trust, which mainly raises funds from small investors and keeps assets longer than other, more opportunistic funds within the firm, which indicates Blackstone’s confidence in the housing market long-term.
“Clearly the tenant demand is still robust, and that’s driving significant cash flow increases at the property level,” Jeff Langbaum, an analyst at Bloomberg Intelligence, told Bloomberg. “Smart people with smart money want to get a piece of that.”